Here’s a note from Lynn Turner:
Recently, the PCAOB sanctioned PWC as a result of partners having a financial relationship with a bank the firm audited. Then the firm lied to the banks audit committee when it sent a letter to the committee saying there were no independence issues. The rules on this issue is not new. The SEC sanctioned another of the Big 4 firms – EY – as a result of similar problems some 30 years ago.
I too have served on an audit committee where a Big 4 firm sent us a letter saying there were no independence issues, only to find out the firm was aware of issues they withheld from the committee. This is a huge issue for audit committees and investors. The PCAOB’s sanction of $100k is a slap on the wrist in this instance. Which perhaps explains why we continue to see this type of behavior by the firm’s go unabated.
Does the PCAOB Undermine Auditor Professionalism?
In 2002, the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board and transformed public company auditing in the United States from a self-regulated, to a regulated, profession. The PCAOB’s statutory mission is to “further the public interest in the preparation of informative, accurate, and independent audit reports” — in other words, to improve audit quality. Based on objective measures, such as frequency of restatements and magnitude of financial reporting failure market losses, most observers would probably agree that the PCAOB has made considerable progress toward accomplishing that goal.
A separate issue is how PCAOB oversight has affected the experience of being a public company auditor and auditors’ perceptions of their professionalism. Three academic researchers, Kimberly D. Westermann, California Polytechnic State University, Jeffrey Cohen, Boston College, and Greg Trompeter, University of Central Florida, have undertaken to explore that topic. Their findings raise questions about the long-term impact of PCAOB oversight on the auditing profession.
CAMs: Snapshot of Filings By Types of Disclosures
Recently, Deloitte put together this nifty chart indicating what types of matters where deemed “CAMs” in recent filings by large accelerated filers. Check it out…
– Broc Romanek