More good stuff for auditors – 12-16-13

A few links and comments of interest to auditors – double counting JPM settlement amounts, payroll fraud, PCAOB proposals.

11-7 – Bloomberg – Holder’s Credit Grab at JPMorganCooking the books at Department of Justice? That’s how Jonathan Weil reads the DoJ effort to take credit for a JPM settlement with Fannie and Freddie.  JPM will pay them $4B related to a suit from their regulator. DoJ is taking credit for that settlement in their negotiation with JPM. Thus a $9B settlement, still no small change, gets inflated to $13B. Cooking the books? That’s Mr Weil’s conclusion.

11-10 – CPA-Scribo – Ghostly Payroll Fiends – Great reminder to keep your eyes open for Inflated hours, Duplicate payroll payments, Ghosts, and Inflated pay rates. As always, segregation of duties is the answer. Auditor awareness is critical.

12-4 – Wall Street Journal – PCAOB Proposes Rule to Identify Partners in Charge of Audits PCAOB will take another shot at getting the name of lead partner listed in the accountant’s report.

12-4 – Re:Balance – The PCAOB Still Wants Audit Firms to Name Lead Partners — The Case for Indifference– I think Jim Peterson’s perspective could be summarized in one word: inconsequential.

He sees this as an insignificant, irrelevant change with lame arguments both in favor of and opposed to what is. A few of his comments:

If the triviality of the issue were not compelling, it would be important to call out the confirmation bias lurking in Doty’s invocation. …

It would be so dispiriting, if it mattered. …

To retail investors, it would be a challenge to name the audit firms that serve their portfolio companies – much less would they register the identity of a single partner.

As for the real decision makers, audit committees, boards, and all of senior management, they have met repeatedly with the lead partner and have him on speed dial. Likewise with any regulators that have even passing interest.

12-6 – The Economist – Shining a light on the auditors – Gotta’ love the start and end of the opening paragraph:

EVERY financial meltdown prompts a hunt for scapegoats. … But for all the heated debate over the changes, any improvement is likely to be modest.

Three major items on PCAOB’s agenda: disclose “critical audit matters”, disclose outsourcing of audit work at 5% threshold instead of 20%, and disclose name of lead partner.

Article points out that most academic research has found one of two results. Either there’s no correlation between length of audit tenure and audit quality, or that longer tenure produces better audits.

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