In the early years of this century, a number of large public firms, including Enron and WorldCom, collapsed in spite of consistently receiving clean bills of health from their auditor, Arthur Andersen.
Andersen disappeared and the Public Company Accounting Oversight Board (PCAOB) was born.
Andersen disappeared and the Public Company Accounting Oversight Board (PCAOB) was born.
Outgoing PCAOB chairman, James Doty, recently gave the remaining Big Four accounting firms, and others who audit public companies, even more power - and responsibility.
Beginning in 2019, auditors must do more than simply give a "pass or fail" opinion regarding whether their client's record keeping follows generally accepted accounting practices.
They must now also disclose "critical audit matters," which include confrontations they've had with management regarding the veracity of data provided.
Auditors help investors trust the numbers published by public companies. Unfortunately, investors don't hire the auditors.
As long as public firms are the auditors' clients, there will always be inherent conflicts of interest - and opinion - regarding financial reports.
Let's hope that the significant decline of accounting scandals in recent years indicates a heightened level of fiduciary responsibility by all parties.
Peter
Beginning in 2019, auditors must do more than simply give a "pass or fail" opinion regarding whether their client's record keeping follows generally accepted accounting practices.
They must now also disclose "critical audit matters," which include confrontations they've had with management regarding the veracity of data provided.
Auditors help investors trust the numbers published by public companies. Unfortunately, investors don't hire the auditors.
As long as public firms are the auditors' clients, there will always be inherent conflicts of interest - and opinion - regarding financial reports.
Let's hope that the significant decline of accounting scandals in recent years indicates a heightened level of fiduciary responsibility by all parties.
Peter
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