After shaking up U.S. markets with talk of new audit reports and mandatory rotation, James Doty, chairman of the Public Company Accounting Oversight Board says the board will soon consider another proposal that will require auditors to tell public companies how their audit work is parceled out to affiliate firms, sometimes overseas.
In an address to the to the Federation of European Accountants’ conference on audit policy, Doty said management and investors should know when U.S. audit firms are sending significant portions of audit work abroad. He’s been surprised, he said, by how often he encounters savvy business people and senior policy makers who are unaware that much of the work behind their audit report was conducted offshore by affiliates of the Big 4 firm that signed the report. “Such firms are often completely separate legal entities in other countries,” he said. Investors should know that so they can better understand how an audit was conducted and how to use the report.
