Will Auditors Be Held Accountable? The PCAOB Has A Plan

Will Auditors Be Held Accountable? The PCAOB Has A Plan

I view successful litigation against negligent auditors and strong enforcement of sanctions for auditor malpractice as positive developments. This is a view many of my readers would disagree with. However, I've learned over the last four years not to get too excited by any one positive development on the auditor regulation or litigation front.

If you think auditors should be immune from liability or accountability for their malpractice and aiding and abetting fraud, you've bought the "too few to fail" argument. You've abandoned the expectation of a public duty for audit professionals. Maybe you don't think audit is a profession anymore. The global audit firms have a successful business model - albeit an oligopolistic one. You've accepted the fact that audit firms will look after their partners and their profits before the public and believe they have every right to do so.

You would be wrong on all counts.

This week I will be in Washington DC to attend the March 24 meeting of the new Standing Advisory Committee (SAG) of the new PCAOB. Three new PCAOB Board members were appointed late last year after the Supreme Court removed the cloud of uncertainty over its continued existence with their decision in Beckstead v. PCAOB.

The SAG 2011 group includes some new members and some in their second term. Many of them I have met and spoken to in the past. Some of them I even knew professionally prior to their appointment. The PCAOB also initiated an Investor Advisory Group (IAG) in 2010. There are some SAG members in this group and some additional members as it is intended to represent the investor community - the intended users of auditor reports and the auditors' true client.

Last Wednesday, March 16, 2011, the PCAOB IAG held their first meeting of 2011. Several working papers were presented and some strong statements were made. New PCAOB Chairman Jim Doty also reiterated statements that portend changes for auditors and increased scrutiny of their actions, especially surrounding the financial crisis.

Read this article in its entirety at the re: The Auditors, a blog by Francine McKenna.

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