accounting firm

Audit conflicts must go!

Tue, 29 Apr 2008 06:59:59 -0400

We recently suggested it would be a good idea for firms to get rid of all potential conflicts of interest in the audit process regarding directors or executives. We noted the case of Feldman Mall Properties, which hired an accounting firm owned by one of the directors. As it turns out, the Public Company Accounting Oversight Board is moving on this issue, according to cfo.com. It seems to favor a rule that would require accounting firms to inform audit committees about any potentially tricky relationship. Anyone in an important financial role that might be able to influence the auditor would be required to disclose the relationship. Only then would a contract be allowed. In many ways, this seems like a no brainer. Audit committees need all the information they can get about these sorts of relationships before making decisions.

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

Get rid of related party conflicts

Tue, 22 Apr 2008 06:59:58 -0400

While Sarbanes-Oxley does not strictly proscribe contracts with firms owned by directors, it is a bad idea. Many companies have worked to put an end to what seems like inside dealing (fair or not). As an example of how this can harm the company, consider the investment trust Feldman Mall Properties. It hired an accounting firm, Brandywine Financial Services, owned by one of its directors. A media firestorm soon erupted. The company said the firm offered the best deal, but the point seemed lost. PR and image damage is a real possibility in these situations, especially at a time when a stock is weakening anyway. In general, better not wave this particular red flag. Article

BDO Seidman's brush with fate

Tue, 21 Aug 2007 06:59:59 -0400

The future of BDO Seidman is something that you have to question right now. A Florida jury hit BDO Seidman, a top five accounting firm, with a $351 million in damages for failing to uncover massive fraud at one of its clients. That came on top of an earlier award of $170 million in compensatory damages. At least one person thinks the company will not be crippled. But that may be wishful thinking. Most assume that the firm will be forced to seek bankruptcy court protection if it has to truly pay. All clients are in something of a quandary. If they were pondering a change, this might seal the decision. Of course the list of potential clients just shriveled. BDO Seidman says it will appeal--and has noted its past appellate success. That an accounting firm has a lot of this sort of experience is not really anything to brag about. But it may indeed serve the firm well. A lot is riding on this.

For more:
- see this article

Sarbox court challenge steps up

Mon, 08 Jan 2007 19:01:39 -0500

Most people in Washington, from both parties, are in favor of some sort of Sarbox reform. A less-heard argument is that the basic structure of Sarbox is unsound, the PCAOB is unconstitutional, and the whole law should be scrapped. It might seem far-fetched position, but last month a judge in U.S. District Court for the District of Columbia started hearing arguments in a Sarbox case filed by a fund that supports conservative causes and an accounting firm. The suit basically says the Public Company Accounting Oversight Board lacks accountability and that the Sarbanes-Oxley unconstitutionally created it. It argues that the constitution requires key executive branch officials to be appointed by the president. The larger goal of the plaintiffs seems to be to scrap the law in its entirety. I am not sure if this would do companies any favors. Most people have made their peace with the law, though they support modifications.

For more:
- here's a article from law.com

Backlash brewing against auditors?

Mon, 30 Oct 2006 19:01:39 -0500

You may have heard about the mock disclosure document that has garnered notoriety. It's couched in the obtuse language of "risk disclosure" and contains some real gems: "We are at the mercy of our independent auditor, which may abruptly change its views regarding proper accounting practices and blame us for it. This could adversely affect us." And: "There is also substantial risk that our auditor will disavow any knowledge of our operations, our accounting practices or our very existence prior to the date of the filing in which we disclose that what it told us earlier was wrong."

Truth be told, companies seem generally vexed by auditors these days. Sarbox has led to enhanced accounting firm revenues, but clients wonder if the added pay is really worth it. Of course, there are some obvious scapegoats, the SEC, the PCAOB, the national office of accounting firms. Some big blow-ups between big companies and their auditors seems likely.

For more on the "risk disclosures:"
- here's an International Herald Tribune column

Is the PCAOB constitutional?

Mon, 11 Sep 2006 20:01:39 -0400

The government has responded to the somewhat novel notion that the PCAOB is unconstitutional. The charge was levied originally in a suit filed by the think-tank Free Enterprise Fund. A small accounting firm also signed on as a plaintiff. The suit generated little excitement and little press. Few are counting on a big courtroom win. Frankly, if the plaintiffs' view were to prevail, it just might cause yet another round of costly regulatory confusion. For its part, the SEC and Justice Department recently weighed in with a brief that makes the case for constitutionality, arguing among other things that there is no requirement that the president must elect PCAOB officials.

For more on the brief:
- Here's an article from AccountingWEB

Also, seven of eight ex-SEC chairman support PCAOB. Article

Suddenly, accountants are hot--and happy

Mon, 26 Jun 2006 20:01:35 -0400

You're hot! And didn't even know it. Accounting and financial pros are in heavy demand at all levels, not just the C-level. At the same time--and this might surprise you--financial employees seem to be happier than most employees. According to one survey, nearly 80 percent of accounting and finance employees are very or somewhat satisfied with their jobs, compared with 72 percent for the survey population. And nearly 35 percent are very satisfied with their compensation, compared with just 28 percent of all respondents. You hear a lot of grumbling about the costs of Sarbox and other compliance efforts. But the work has created a virtuous cycle of sorts for employees: More challenging work, which leads to more pay, which leads to higher job satisfaction.

> Check out this article about the survey in CFO.
> Hiring is up. Article
> Sarbox is apparently leading to boom in accountant graduates. Article
> Here's how one small accounting firm is thriving. Article