With all the talk about shareholder access and restricting activist investors and limiting what and how anyone but management can get something on the proxy, I think it’s a little disingenuous for PwC to be encouraging the average shareholder to bring a list of curve ball, tough questions to their next shareholders’ meeting and start firing away.
It’s particularly galling since PwC doesn’t seem to hold themselves to the same standards when deciding to re-up as auditor of a client that’s suing them or to continue serving as external auditor of more than one that could have benefited from their asking a few curve ball, tough questions for a change instead of going along for the ride.
I especially like these covering Corporate Governance and the External Auditor:
138. How often do the external auditors meet with the audit committee? Does management participate in the meetings? Does the audit committee meet separately with the external auditors without management present?
139. Does the audit committee review the scope of external audit activities in advance? Does it meet with the external auditors at the conclusion of the audit? What mechanism ensures that the committee follows up on audit recommendations?
140. Does the audit committee appoint the external auditors? What process does the audit committee go through to determine whether to reappoint the existing auditors or select new auditors? Why isn’t the selection subject to shareholder ratification?
141. Does the agreement with the external auditors include any limits on potential liability by the auditors or contain an agreement on the processes that will be used by the company in case of disputes with the auditors?
142. What steps does the audit committee take to oversee or help ensure the independence of the external auditors? Has it received the communications from the auditors about their independence? Have there been any independence infractions by the auditors? How has the board/audit committee satisfied itself that the auditors are independent?
143. Do the external auditors have any relationships with management or the board of directors that may be viewed as a conflict of interest?
144. Did any members of management come from the external audit firm? How many worked on the audit prior to joining the company? Has this information been disclosed to the audit committee? Have any offers of employment been made to members of the current audit engagement team?
145. Is the audit committee responsible for the external auditors’ compensation for audit and nonaudit services? Does the audit committee have a policy for preapproving audit and nonaudit services? Is the audit committee’s preapproval policy compliant with the requirements of the Sarbanes-Oxley Act and SEC rules and regulations?
146. What process does the audit committee use in considering whether the provision of nonaudit services by the external auditors was compatible with maintaining the auditors’ independence?
147. What nonaudit services were provided by the external auditors? Why are the nonaudit fees so high in relation to the audit fees? How do the nature and relative amount of nonaudit fees compare with other companies in the industry?
148. For services provided by the external auditors, has there been a competitive bid process or other means to ensure services are priced and performed at market prices and under standard professional practices? What fees are paid to other consulting firms and what percentage of total consulting fees do the external auditors receive?
149. Do the external auditors audit the company’s benefit plan(s)?
150. Did/does the external auditors provide services in relation to the company’s readiness under Section 404 of the Sarbanes-Oxley Act? Has the audit committee considered any potential independence issues resulting from these services?
151. Do the external auditors advise the company on income tax planning strategies? Has the audit committee considered any potential independence issues resulting from these services? What controls are in place to ensure the external auditors are not providing prohibited tax services?
152. Do the external auditors provide advice on the accounting treatment of various financial structures (e.g., mergers, acquisitions, and divestitures) to the company? Are these transactions reported to the audit committee? Have there been any disagreements with the external auditors over the company’s accounting treatment for these complex transactions?
153. How many years have the external auditors been auditing the company? Has the company considered periodic rotation of auditors? What impact has the company seen as a result of the mandatory partner rotation rules required by the Sarbanes-Oxley Act?
154. Has the company experienced any significant changes in its relationship with the external auditors under the auditing oversight of the PCAOB?
155. Have the auditors undergone a peer review or internal quality control inspection? What were the results of their latest (AICPA-mandated) peer review or internal quality control inspection?
156. What were the results of inspections by the PCAOB of the external auditors?
157. What assessments, if any, has the company made regarding the litigation record of its external auditors? Has the company evaluated the effect of any litigation that the auditors are involved in?
158. Are the company’s external auditors named a defendant in any recently publicized litigation class-action suit? If so, is the company joining this suit for any settlement?
159. Why were the company’s former external auditors dismissed/replaced? Why did the auditors resign or not stand for reappointment?
160. Were there any accounting disagreements with the company’s former external auditors preceding the change? What was the nature of the disagreements?
161. Has the audit committee consulted with its own counsel or another auditing firm? What circumstances gave rise to the consultation? Does the audit committee expect to have similar consultations in the future?
162. Does the company use different auditing firms for any subsidiaries? Are all company operations audited? Was the auditors’ report on any subsidiary’s financial statements qualified? If so, why doesn’t the principal auditors’ report disclose this?
163. Do the external auditors investigate and report on all acquisitions?
164. Do the external auditors visit the company’s major locations on a regular basis?