Maybe the Times should have asked Salzberg more pertinent questions: like how he’ll lead the firm through extreme downward pressure on audit fees, loss of his firm’s market share in the financial services audit area, the boom-bust staffing cycle the firms juggle given a business model highly dependent on a steady stream of low-cost college recruits, and the huge amount of time and money spent on litigation instead of enforcement of audit quality.
Better still, Salzberg might have been asked where Deloitte will find CPAs who can demonstrate professional skepticism, rather than worry, as so many auditors do, about fitting in, how the firm will train them to resist company pressure to compromise standards, and how to support the ones who blow the whistle on fraud and accounting manipulation.
Now, that would be a Q&A.
Great post.
If this whole mess weren't Fannie Mae, Freddie Mac and Barney Frank's fault(TM) it might get some traction.
#1 Posted by edward ericson jr., CJR on Wed 25 May 2011 at 10:17 AM
Thanks, e.e. jr.
Barney Frank was less than frank when I asked him, before final passage of what became Dodd-Frank, about auditor reform. There was minimal mention of the audit firms, unlike the ratings agencies who have the same model and conflicts, in the final bill.
Francine
#2 Posted by Francine McKenna, CJR on Wed 25 May 2011 at 08:17 PM
Francine,
I am a Big 4 Manager, and could not help but notice that you really do not understand the role of an auditor, so let me fill you in. An auditor's responsibility for public companies is to express an opinion on the reasonable presentation of the financial statements and the "Design and Implementation" of internal controls (not their operating effectiveness). It is NOT an auditor's job to detect fraud, search for fraud, or search for intentional misrepresentations by the client, as this is beyond the scope of the audit (and this position is supported by the SEC). In NO way is it an auditor's fault when a company experiences hardship due to these factors. Nearly all of the baseless lawsuits filed by struggling companies such as Bear Stearns is their weak attempt to grasp at straws and spread the blame to cover up their mistakes before they completely go under. Understand what the hell you are trying to "express to the public" before you start vomiting from the mouth as you did in this article. You should be embarrassed by your lack of knowledge on something you put your name on.
#3 Posted by Rajav, CJR on Wed 1 Jun 2011 at 10:08 AM
Rajav - Francine has broached two important issues here. One concerning the editorial policy of the NY Times and the other concerning the value of the audit. As an investor, I have come to the conclusion that the purpose of the audit is as a 'loss leader' in the accounting firms' efforts to secure multi-million dollar contracts for IT and tax consulting. In that regard, I would like to see the audit requirement disappear. Removal of this regulatory tax would add billions to companies' bottom lines. Regarding the editorial policy of NY Times INC., Francine has pointed out their all too deft editing in squeezing these two ostensibly conflicting book promotions into the same issue. CJR ought to look into an award for that.
P.S. Rajav - If your description of what an auditor is/does were included on proxy statements, I guarantee your industry would get some long overdue attention.
#4 Posted by David Fialkowski, CJR on Mon 13 Jun 2011 at 02:34 PM
Rajav,
The tragedy is what you don't know because your professors were too cowed by Big 4 recruiters to make sure you did, and because the partners you work for are too focused on money to coach and mentor you to the right path.
I've written on SAS 99 many times. So has PCAOB Chairman Jim Doty. Be careful out there. The expectations of investors - and regulators - are much higher than what your current leaders have led you to believe.
#5 Posted by Francine McKenna, CJR on Sun 19 Jun 2011 at 11:50 AM
David,
Thank you for your comment. It's on the money and much appreciated.
#6 Posted by Francine McKenna, CJR on Sun 19 Jun 2011 at 11:52 AM
Rajav,
PCAOB AS5 requires the examination of the design AND operating effectiveness of internal control regarding financial reporting in the audits of public companies. All the companies Francine mentioned are issuers. You should be embarrassed by your abject ignorance.
#7 Posted by Mike, CJR on Sun 21 Aug 2011 at 09:19 PM