In Episode 449 of the FCPA Compliance Report, I spoke with Tom Fox to discuss the current status of the KPMG defendants and what their conduct means for the audit profession going forward.
Would investors still pay for an audit if it weren’t legally mandated? Are regulators and exchanges perpetuating a government-mandated oligopolistic exclusive franchise for the Big 4 and a few additional firms that produces information investors now ignore?
I’ve been coaching my colleagues on how to spot updates and interesting anecdotes about revenue recognition during the second quarter earnings season. Now we are catching up on the Qs filed and comparing disclosures after concentrating on what was said in earnings releases and calls.
Once I returned from my Stigler Center fellowship I got to work catching up on the new standard, talking to experts everywhere and working with Audit Analytics to come up with the data to support stories–by my and my colleagues–about companies and their response to the new standard. My goal was to pick some of the obscure topics that were unique or focused on a specific industry.
The last time anyone attempted to “modernize” auditor independence rules it was the Securities and Exchange Commission, in 2000, before the Enron failure and Arthur Andersen’s demise, as a result of the growing concern that firms increasing focus on consulting was distracting them for their core purpose, auditing. The Big Four firms are now opportunistically lobbying to go back in time, before Enron, when the industry was self-regulated and mostly left alone, able to have as many conflicts of interest as their powerful public clients would allow.
The KPMG/PCAOB scandal is neither the first or last time a Big 4 firm reminded us that there’s nothing special anymore about being a Big 4 firm professional The firms, and their partners, are not capitalist eunuchs, immune from perverse incentives that advocates for free markets say, if big enough, can corrupt anyone.
Jim Doty’s term as chairman of the PCAOB, the audit regulator, expired in October. All summer since I arrived in Washington D.C., leading up to that date and since, there’s been speculation about whether or not SEC Chairwoman Mary Jo White would reappoint him to the job.
I was interviewed back in August by Tom Fox for his podcast on FCPA compliance and ethics issues.
A new study says smaller public companies are paying a premium for the prestige of a Big Four auditor but the auditors are dangling small clients as chum for their large acquisitive shark audit clients.
British MP Margaret Hodge grilled Kevin Nicholson, of PwC’s UK tax practice, in a Parliament Public Accounts Committee hearing on Monday. You know you’re on your “back foot” when the first thing out of your mouth has to be a denial that you lied under oath. More details about PwC’s tax avoidance scheme for audit client and US government owned AIG.
Update: This column was linked to by the NYT Public Editor! I published some New York Times numbers over at Forbes.com, “Time Is Running Short For The New York Times”, in anticipation of the company’s 3Q earnings announcement on October 30.
Did you know that each of the Big Four audit firms and some of the next tier also run SEC-registered broker-dealers? You’ll never guess who audits them.