PriceWaterhouseCoopers

SEC's stance on restatements raises brows

Jim Kim — Thu, 28 Aug 2008 21:04:27 -0400

The conventional wisdom seems to be that restatements stemming from material weaknesses have declined. That seems to be most true when it comes to big companies. You would have to think that Sarbanes-Oxley had something to do with that. Six years in, most companies have a better grip on their financials, but the law isn't the only factor. Financial Week reports that some critics say the SEC has taken a more lax view toward restatements. Chief accountant Wayne Carnall--who joined the SEC in 2007 after a stint in PricewaterhouseCoopers' national office--may bring more of an auditor's sympathies to the process. More companies seem to be asking advice and being told that they do not need to restate. It will be interesting to see how small companies are affected. You would expect a rise on restatements as the law takes hold. We'll see if that bump materializes.

For more:
- here's the article

XBRL standards body stokes worry

Jim Kim — Thu, 17 Jul 2008 08:40:17 -0400

Most people think XBRL is a pretty good idea. But not everyone thinks the tag standards should be set by XBRL US, a non-profit group comprising top accounting firms KPMG, PricewaterhouseCoopers, Ernst & Young, Deloitte & Touche and Grant Thornton. One fear, as noted by Financial Week, is that the standards organization will someday start selling more consulting services, which could create the impression of a conflict of interest. XBRL US says it will limit the services it offers and will not compete with its members. Another fear is that the powerhouse audit firms will be able to unduly affect the evolution of the data tags via XBRL US in ways that will benefit their consulting businesses. I do not think any of this is a showstopper. But XBRL US would be wise to take proactive steps to deal with any misunderstandings now. In May, the SEC proposed that large companies begin complying as early as 2009.

For more:
- here's the Financial Week article

Credit issues a big topic this year?

Tue, 12 Feb 2008 06:59:59 -0500

How do you control for potential credit-related problems? That's a good question right now, as the annual meeting season gets underway. It's something that executives and compliance managers probably ought to get a grip on. While we tend to think of the credit meltdown as a financial industry issue, it has spread rapidly. Bristol Myers Squibb recently wrote down $275 million to account for its subprime-related exposure. The CEO of PricewaterhouseCoopers says more nonfinancial firms are at risk. So how do you model this risk. There is likely no financial control for this sort of risk. But the fair-value issue has been out there for many years. Still, it's better to start talking about this now.

For more:
- here's a Financial Times article

Sarbanes Oxley effect still palpable in hiring

Tue, 29 Jan 2008 06:59:59 -0500

I've said it before, and it's worth repeating: the Sarbanes Oxley act ought to be the accountants' full employment and high-pay act. This is how a PricewaterhouseCoopers manager tells the story to the Wall Street Journal: "We beg, we borrow, we steal, we grovel, we scour the world" to find accountants. Salaries are up. That's for sure. Compliance is a hot field of course. But forensic accounting is hot as well. So for all the talk that compliance will be less onerous for auditors and clients, the hiring need is still massive.

For more:
- here's the Wall Street Journal article

Case study: Boeing and Sarbanes-Oxley

Tue, 24 Jul 2007 06:59:59 -0400

The Seattle P-I offers a rare look at what goes on inside a major company struggling to comply with Sarbanes-Oxley. This is a must-read article. Rarely, is the pain reported so clearly. For all its wizardry with jets, the company has struggled with Sarbox. One employee described the process as "pure hell." The same scenario is likely playing out at other companies. The company approached it like it was designing a new plane. But a deep rift between the finance and IT emerged and really hampered the process--something we've been warning about. The finance side said the IT side was too rigid; the IT guys said the finance guys kept changing their minds. PricewaterhouseCoopers and Jefferson Wells apparently were at loggerheads often. Sound familiar? Really this is a great example of all that can go wrong. For all the effort and pain, there are still significant deficiencies--despite millions of dollars and a bevy of high-priced consultants--that the firm must grapple with. A good place to start would be with the compliance culture. Of course that is the hardest thing to change.

PwC ensnared in backdating controversy

Mon, 09 Jul 2007 20:01:39 -0400

The plight of Gary Gerhardt, former CFO of Engineered Support Systems, is a cautionary one for anyone in the compliance arena. Is informing your auditor, in this case PricewaterhouseCoopers, enough? Gerhardt says he told his audit firm that options granted to executives were backdated so as to be "in the money." Therefore, the firm and he should rescind Gerhardt's criminal indictment, he argues. This is an interesting question, and an old one. Who bears the brunt if the practice has been okayed by an audit firm? A reasonable executive would think he has the greenlight in most cases. In this case, the issue may not be that simple. There was other questionable activity that prosecutors have identified. Of course, just because an audit firm knows doesn't mean investors know. Still, there are areas of the audit firm-company relationship that are very tricky to say the least.

For more:
- here's the article from cfo.com

Time to really implement continuous auditing?

Mon, 21 May 2007 20:01:39 -0400

We've noted that the enterprise risk management has become one of those often-heard, little-understood corporate buzzwords recently. A recent study by PricewaterhouseCoopers suggests that the concept is still largely an abstraction. Yes, there is a lot of interest in ERM. But very few companies update the internal risk assessment continuously. About 65 percent do little or nothing between annual assessments. This suggests that there is still a lot of dissatisfaction with the process. Too many assessments are undertaken piecemeal with the various parts not always acting in concert. The study suggests that audit committees are still vexed by multiple assessments that come to different conclusions. Everyone agrees that management needs to address this. But how? At smaller companies, this will be a huge issue as they finally have to start attestation. Companies that take a coordinated hyper-organized approach will likely fare better. But that's easier said than done. It means a lot of planning, and a lot of cross leveraging of work and assets, specialists and previous work. Good luck.

For more:
- here's the release
- access the report here

But it was supposed to be a good PR move

Mon, 26 Feb 2007 19:01:39 -0500

For most of the past 72 years, the fact that PricewaterhouseCoopers has been validating the Academy Awards voting has been a good PR move. A great way to get a brand out there--almost like a major gold event sponsorship. In the Sarbox era, however, that is no longer true. Slate magazine has used the occasion to deliver a not-so-great profile of the firm. It notes that PwC is no Arthur Andersen. But it has had some missteps, noting its work for Tyco, Lucent and Bristol-Myers Squibb. The article also notes that the PCAOB has found deficiencies, including "failures by (PwC) to perform, or to perform sufficiently, certain necessary audit procedures." In some cases the deficiencies "were of such significance that it appeared to the inspection team that (PwC) had not obtained sufficient competent evidential matter to support its opinion on the issuer's financial statements." Well, there are going to be bad days. All that said, there has never been a breach in PwC's long history with Oscar. Let's hope the record survives.

For more:
- here's the article

Accountants aim to repair Sarbox-related image

Mon, 05 Feb 2007 19:01:39 -0500

For the accounting firms, the Sarbanes-Oxley era has been one in which their professional image has suffered some huge PR blows. They were once seen as impartial, bean-counters making sure that a company's finances were up to par. Then came Enron and all the other scandals--including the Arthur Andersen fiasco--and all of sudden the bean-counters were stereotyped as criminals. The industry is out to change that. The Center for Audit Quality was launched last week by the AICPA and BDO Seidman, Crowe Chizek, Deloitte & Touche, Ernst & Young, Grant Thornton, KPMG, McGladrey & Pullen, and PricewaterhouseCoopers. It's goal is to foster confidence in the audit function. We'll see what steps they take, especially in regards to public perception of Sarbox issues. They'll be promoting a lot of other trade group-like stuff as well.

For more:
- here's an article from CFO.com

Related Articles:
Do accountants need liability protection? Report
Accounting errors persist, tiny companies in hot seat. Report

ALSO NOTED: Reform Sarbox movement heats up; PWC earnings fairly strong;

Mon, 06 Nov 2006 19:01:38 -0500

> The movement to reform Sarbox is certainly heating up. But there are those that warn against throwing out the baby with the bathwater. While there are good changes to be made, some see the movement as an attempt to rein in oversight by state attorney generals and make investor suits harder. Article

> PriceWaterhouseCoopers reported revenue growth of 11 percent. Notably, audit and assurance services, which account for more than half of the firm's revenues, grew a moderate 7.8 percent, as Sarbox-related activity moderated. Info

> The anti-Sarbox crowd can now argue that the law has actually resulted in lost lives. CardioMag Imaging claims that Sarbox can actually cost lives. The biomedical industry has certainly been vocal about the effects on innovation. Article

> Lawyers' salaries keep going up. Sarbox is one of many reasons. Article

> Is your IT governance program failing you? Article

> North Carolina bank group presses for change to law. Article

And Finally... Leaving a career in finance. Article