A few links and comments of interest to auditors. A ridiculous suit against a Big 4 firm, reminder on confirmations, a Big 4 partner on his way to jail, and three articles on whether PCAOB is exaggerating the severity of inspection results.
3/31/14 – Jonathan Weil at Bloomberg View – Go Ahead, Blame the Accountants – In a tweet pointing to the article, Mr. Weil wonders what is happening to him, what with defending a Big 4 accounting firm. The lawsuit from failed MF Global Holdings against their auditor, PwC, is a source of some amusement when the details are considered. MF Global accuses PwC of causing MF Global to violate GAAP.
Mr. Weil finds that an odd contrast to the complete lack of any admission anywhere by MFG that their financials violated GAAP. Multiple investigations have pointed out lots of problems, but not any accusations of breaking GAAP. Yet that is one of the wrongs by PwC. Several other entertaining accusations. Mr. Weil says
This is one of the most ridiculous lawsuits I have ever seen.
8/10/13 – The F Student – Back in the Day … Today – Never mind the article’s title. It’s actually about confirmation fraud and cash fraud. Great reminder of the need to pay attention to the entire confirmation process. Messing with the confirmation is easy. A great reminder:
It is simple and relatively inexpensive to create a fake website so be vigilant
2/23/14 – The F Student – Who Runs Things? – Summary of former Grant Thornton partner who siphoned $3.94M of client payments to his own account. Wrote off the hours for those fees to hide the defalcation. Update reports he was sentenced to 4.5 years in the federal pen.
3/12 – Journal of Accountancy – Stop using “audit failure” term in PCAOB reports, Hanson says. Looks like the first visible discussion.
3/24 – Compliance Week – Purge Failure, Rates in Reports, PCAOB Member Says– Article highlights basic issues: First, PCAOB created its own definition of audit failure. Second, extrapolation of selectively chosen audits to the total population of audits is not a proper conclusion.
3/24 – Going Concern – One Guy at the PCAOB Thinks the PCAOB Should Consider Its Language – One commenter makes the analogy that there is a big difference between one company that has 5 deficiencies and 0 material weaknesses in internal control compared to another company that has 1 deficiency, 2 significant deficiencies, and 3 material weaknesses. Both companies do not have a failed internal control system.
3/28 – Accounting Onion – You Shouldn’t Have to be an Auditor to Understand the Audit Report – In spite of disclaiming expertise as an accounting history, the good professor provides a helpful history of how the fairly presented and in accordance with GAAP comments developed. He makes the very good point that only people who have studied the accounting literature understand those phrases. I’d add that understanding them is easy if you have many years experience as an auditor. He suggests the PCAOB ought to expand their review of the audit report to include replacing those phrases.