SEC前首席會(huì)計(jì)師：會(huì)計(jì)師行業(yè)急需大改革，取消法定審計(jì)，
上市公司不應(yīng)直接付款給審計(jì)師......（全文）
美國證監(jiān)會(huì)前首席會(huì)計(jì)師 Lynn E. Turnner 近日撰文指出，美國的公共會(huì)計(jì)師行業(yè)需要大改革，包括需要提供質(zhì)量，透明度，治理水平和問責(zé)制。文章不僅指出了美國上市公司審計(jì)長期存在的一些問題，諸如審計(jì)質(zhì)量低下，審計(jì)師缺乏獨(dú)立性等等；更重要的是，文章中提出了一系列改革建議，包括：
取消對(duì)上市公司法定審計(jì)要求，改由上市公司的股東來決定，從法定要求轉(zhuǎn)變?yōu)槭袌?chǎng)決定；
取消由上市公司直接付審計(jì)費(fèi)用給審計(jì)師的傳統(tǒng)做法， 由PCAOB 先收取審計(jì)費(fèi)， 審計(jì)師向PCAOB申請(qǐng)撥款，后者基于審計(jì)質(zhì)量付款；
大型會(huì)計(jì)公司需要改變大量使用“小朋友“的金字塔人員配置結(jié)構(gòu)，改用律師行業(yè)的專業(yè)人員配備模式；
獲取CPA 資格需要獲取會(huì)計(jì)專業(yè)碩士學(xué)位......
以下是該文章全文， 中文翻譯僅供參考， 英文原文為準(zhǔn)
作者Lynn E. Turner是美國證券交易委員會(huì)前總會(huì)計(jì)師，現(xiàn)為Hemming Morse LLP的高級(jí)顧問。
從1933年《證券法》的通過開始，國會(huì)要求對(duì)美國的所有上市公司進(jìn)行獨(dú)立審計(jì)。國會(huì)對(duì)1933年法案進(jìn)行辯論時(shí)，曾討論過是否由政府雇員進(jìn)行審核。受美聯(lián)儲(chǔ)，貨幣審計(jì)署（OCC）和聯(lián)邦存款保險(xiǎn)公司（FDIC）監(jiān)管的銀行均由政府雇用的銀行審查員進(jìn)行審查。但是最后，對(duì)1933年法案的草案進(jìn)行了修改，以使審計(jì)工作由“獨(dú)立”的執(zhí)照會(huì)計(jì)師（CPA）進(jìn)行。如今，審計(jì)上市公司的注冊(cè)會(huì)計(jì)師目前受到證券交易委員會(huì)及其總會(huì)計(jì)師辦公室以及上市公司會(huì)計(jì)監(jiān)督委員會(huì)（PCAOB）的監(jiān)管。
CPA執(zhí)行的審核質(zhì)量仍然存在問題。2008年10月，美國財(cái)政部審計(jì)專業(yè)委員會(huì)（ACAP）發(fā)布了一份報(bào)告，其中對(duì)SEC，PCAOB和審計(jì)專業(yè)提出了許多建議。這個(gè)由商業(yè)領(lǐng)袖，投資者，前SEC監(jiān)管機(jī)構(gòu)和CPA組成的委員會(huì)在發(fā)布該報(bào)告之前已經(jīng)研究了該行業(yè)一年。然而，十年后的今天，審計(jì)公司或其監(jiān)管機(jī)構(gòu)幾乎沒有采取任何建議。結(jié)果，看起來四家大型審計(jì)公司已經(jīng)變成“太大而不能倒”。
正如司法部最近對(duì)畢馬威會(huì)計(jì)師事務(wù)所的審計(jì)員采取的行動(dòng)所強(qiáng)調(diào)的那樣，許多在SEC或PCAOB監(jiān)管審計(jì)公司的人都加入了這些“四大”公司的監(jiān)管機(jī)構(gòu)，并重返監(jiān)管機(jī)構(gòu)。
影響審計(jì)行業(yè)信譽(yù)和信任的持續(xù)問題包括：
缺乏獨(dú)立性—審核員將其審核的公司的管理層視為其“客戶”而非將公眾視為客戶。對(duì)審計(jì)合伙人而言，保持從年度審計(jì)費(fèi)用中獲得的“年金”非常重要。失去大公司的年金會(huì)影響合伙人的職業(yè)生涯。結(jié)果，保持缺乏偏見和專業(yè)懷疑的需求直接進(jìn)入了維持公司年金的需求并與之沖突。
管理層為他們提供了增加收入/利潤的商機(jī)。
管理層簽發(fā)付款給他們的支票。
實(shí)際上，審計(jì)委員會(huì)的代表通常是聘請(qǐng)和監(jiān)督審計(jì)師到管理層。管理和審計(jì)委員會(huì)經(jīng)常聘用同一名審計(jì)員已有數(shù)十年甚至幾個(gè)世紀(jì)之久，他們繼續(xù)支付年金并收到“干凈的”審計(jì)報(bào)告。
審計(jì)師已在法庭上宣誓作證，他們沒有義務(wù)發(fā)現(xiàn)重大財(cái)務(wù)報(bào)表舞弊并為公共利益服務(wù)。
管理層向獨(dú)立審計(jì)師提供了要審計(jì)的會(huì)計(jì)記錄和財(cái)務(wù)報(bào)表（數(shù)據(jù)）。然后，根據(jù)獨(dú)立審計(jì)師的要求，管理層還向?qū)徲?jì)師提供了支持?jǐn)?shù)字的證據(jù)。當(dāng)審計(jì)師談?wù)撛趯徲?jì)中使用“大數(shù)據(jù)”時(shí)，通常是在管理人員創(chuàng)建和維護(hù)的數(shù)據(jù)庫中測(cè)試數(shù)據(jù)。因此，審計(jì)員檢查的數(shù)字，證據(jù)和支持來自審計(jì)對(duì)象。令人懷疑的是，管理層將提供不支持其創(chuàng)造的數(shù)字的證據(jù)。不幸的是，公認(rèn)審計(jì)準(zhǔn)則（GAAS）并沒有專門解決審計(jì)師考慮與公開信息相矛盾的公開信息的需求。再一次，正是這種類型的信息導(dǎo)致分析師和其他外部研究人員發(fā)現(xiàn)了財(cái)務(wù)報(bào)表和披露中的錯(cuò)誤。正是這些信息使審計(jì)師無法在審計(jì)中解決。
政府強(qiáng)制管理，公司必須購買審計(jì)報(bào)告，而不是真正擁有公司的股東來決定。在這方面，對(duì)上市公司的審計(jì)就像是公共授權(quán)的公用事業(yè)。
缺乏透明度相對(duì)于審計(jì)公司績效和審計(jì)質(zhì)量。沒有為投資者提供必要的信息，以告知他們所投資和擁有的公司的財(cái)務(wù)報(bào)表的審計(jì)質(zhì)量和披露情況。在這方面，要求投資者在沒有做出知情決定所必需的信息的情況下投票和批準(zhǔn)審計(jì)師。在審計(jì)報(bào)告中始終告訴投資者，審計(jì)是按照上市公司會(huì)計(jì)監(jiān)督委員會(huì)（PCAOB）設(shè)定的GAAS進(jìn)行的，這是一種誤導(dǎo)性陳述，因?yàn)镻CAOB發(fā)現(xiàn)審計(jì)公司在遵守GAAS報(bào)告方面存在很大缺陷。
審計(jì)事務(wù)所獨(dú)立治理的缺失。對(duì)美國乃至全球絕大多數(shù)上市公司進(jìn)行審計(jì)的大型審計(jì)公司都缺乏有意義的獨(dú)立治理。上市公司所需要的缺乏治理，導(dǎo)致審計(jì)質(zhì)量和績效缺乏質(zhì)量，責(zé)任感，透明度和治理。
基于來自全球的檢查報(bào)告，審計(jì)質(zhì)量很差，這很糟糕，以至于國際獨(dú)立審計(jì)管理者論壇（IFIAR）召集了六家最大公司中的每一個(gè)的高級(jí)領(lǐng)導(dǎo)來討論質(zhì)量低劣的審計(jì)。IFIAR的全球?qū)徲?jì)質(zhì)量（GAQ）工作組和GPPC網(wǎng)絡(luò)采取了旨在減少檢查結(jié)果頻率的舉措。根據(jù)GAQ工作組確定的目標(biāo)，GPPC網(wǎng)絡(luò)尋求提高審計(jì)績效，這反映出GPPC網(wǎng)絡(luò)在四年內(nèi)的總檢查對(duì)象所占百分比至少降低了25％至少有一項(xiàng)發(fā)現(xiàn)的PIE審核。（請(qǐng)參閱https://www.ifiar.org/）
IFIAR的2016年檢查報(bào)告指出：“對(duì)至少有一個(gè)發(fā)現(xiàn)的上市公共利益實(shí)體（PIE）進(jìn)行的檢查審計(jì)發(fā)現(xiàn)存在缺陷仍然很高，達(dá)到42％?！?nbsp;（請(qǐng)參閱此處。）
審計(jì)公司經(jīng)常指出缺陷率很高，因?yàn)楸O(jiān)管機(jī)構(gòu)正在選擇“高風(fēng)險(xiǎn)”審計(jì)，在某些情況下（并非所有情況下），這是正確的。但是，人們會(huì)期望審計(jì)公司將這些審計(jì)分配給他們最好的審計(jì)師，因此，缺陷會(huì)更少。
最后，即使審計(jì)報(bào)告知道管理層和公司違反法律法規(guī)，也無法向投資者以及審計(jì)委員會(huì)傳達(dá)審計(jì)員的擔(dān)憂。收到聯(lián)邦資金的政府審計(jì)員需要提供這種報(bào)告，而在近年來這樣的情況下，對(duì)富國銀行等公司的審計(jì)則不需要這種報(bào)告。
進(jìn)行改革以建立對(duì)作為公司所有者的投資者的問責(zé)制，提高透明度和問責(zé)制
以下是解決上市公司審計(jì)質(zhì)量差的問題的思路。其中一些想法或建議是十年前美國財(cái)政部ACAP提出的。
取消《證券法》中當(dāng)前的要求，即公司必須接受獨(dú)立審計(jì)師的審計(jì)，從而取消了聯(lián)邦政府的授權(quán)。
將其替換為基于市場(chǎng)的要求，即每5年將一份股東建議書納入年度委托書，詢問投資者是否希望由獨(dú)立審計(jì)師對(duì)財(cái)務(wù)報(bào)表進(jìn)行獨(dú)立審計(jì)。因此，應(yīng)當(dāng)明確的是，獨(dú)立審計(jì)師為公司所有人（即投資者）的工作并為他們的公共利益服務(wù)。我希望投資者通常會(huì)投票支持獨(dú)立審計(jì)，除非他們認(rèn)為進(jìn)行獨(dú)立審計(jì)沒有什么價(jià)值。
如果股東確實(shí)批準(zhǔn)了獨(dú)立審計(jì)的要求（再次，我認(rèn)為他們幾乎總是會(huì)這樣做）：
審核委員會(huì)而非管理層將選擇并任命審核員。不能將此責(zé)任委托給管理層。
然后將要求股東對(duì)審計(jì)員進(jìn)行表決和批準(zhǔn)；
然后，將由審核委員會(huì)（而非管理層）負(fù)責(zé)并負(fù)責(zé)就付給審核員的費(fèi)用進(jìn)行談判；
審計(jì)委員會(huì)將在審計(jì)過程中根據(jù)需要向PCAOB提交審計(jì)費(fèi)用帳單。
PCAOB將向每個(gè)上市公司收取費(fèi)用，以支付審計(jì)員的審計(jì)賬單。PCAOB已經(jīng)建立了從上市公司收取費(fèi)用的機(jī)制
如果PCAOB發(fā)現(xiàn)審計(jì)師按照SEC規(guī)則102（e）的規(guī)定從事了不正當(dāng)?shù)膶I(yè)行為，或者其內(nèi)部審計(jì)質(zhì)量控制存在實(shí)質(zhì)性弱點(diǎn)，則PCAOB可能要求公司將其投標(biāo)書進(jìn)行投標(biāo)。或在審計(jì)方面存在重大缺陷，即審計(jì)師未能遵守PCAOB規(guī)定的GAAS。
在任何情況下，審計(jì)公司擔(dān)任上市公司的審計(jì)師的時(shí)間都不能超過EC今天所允許的20年。
上市公司的所有審計(jì)均應(yīng)要求PCAOB通過的新審計(jì)報(bào)告。新的審核報(bào)告將要求審核員以新的審核報(bào)告形式陳述和討論“關(guān)鍵審核事項(xiàng)”（通常稱為CAMS）。新的審計(jì)報(bào)告還要求審計(jì)師聲明：“聲明PCAOB標(biāo)準(zhǔn)要求審計(jì)師計(jì)劃并執(zhí)行審計(jì)，以合理保證財(cái)務(wù)報(bào)表是否不存在由于錯(cuò)誤或欺詐引起的重大錯(cuò)報(bào)。”
但是，PCAOB豁免了廣泛的公共實(shí)體，并且不需要溝通關(guān)鍵的審計(jì)事項(xiàng)，即可根據(jù)1934年的《證券交易法》（“《交易法》”）對(duì)新興增長公司（“ EGC”），經(jīng)紀(jì)人和交易商進(jìn)行審計(jì)細(xì)則17a-5；商業(yè)開發(fā)公司以外的投資公司（例如共同基金）；以及員工的股票購買，儲(chǔ)蓄和類似計(jì)劃（“福利計(jì)劃”）。
如果審計(jì)師在進(jìn)行審計(jì)工作時(shí)發(fā)現(xiàn)公司或管理層違反法律或法規(guī)，可能對(duì)公司的財(cái)務(wù)報(bào)表或經(jīng)營產(chǎn)生重大影響，則應(yīng)要求他們?cè)趫?bào)告中予以披露，就像必須遵守GAO黃皮書審核標(biāo)準(zhǔn)的政府機(jī)構(gòu)審核員。
在2000年8月，由PW前主席主持的審核有效性小組（O'Malley小組）建議，每次審核都應(yīng)包括法證部分。應(yīng)該再次考慮該建議，包括在GAAS中確定審計(jì)師是否需要考慮與證據(jù)管理所提供的信息相矛盾的公開信息。
要求披露每次審計(jì)的審計(jì)質(zhì)量指標(biāo)，并向公司的投資者提供審計(jì)意見。這些指標(biāo)應(yīng)在公司的委托書中披露，作為公司審計(jì)委員會(huì)向投資者報(bào)告的一部分。還應(yīng)要求審計(jì)委員會(huì)在委托書或《章程》中披露委員會(huì)定期進(jìn)行審計(jì)的程序。實(shí)際上，如果審計(jì)公司正在管理審計(jì)質(zhì)量，則它們應(yīng)該已經(jīng)在評(píng)估各個(gè)審計(jì)的審計(jì)質(zhì)量。但是來自全球的審計(jì)檢查結(jié)果提供了一些尚未發(fā)生的證據(jù)。
提高PCAOB的透明度。PCAOB每年檢查很少一部分公開上市公司的審計(jì)，并為每家公司提供其發(fā)現(xiàn)的公開檢查報(bào)告。對(duì)于那些接受檢查的審核，PCAOB檢查報(bào)告也許是當(dāng)今審核質(zhì)量的最佳指標(biāo)。但是PCAOB拒絕提供被審計(jì)公司的名稱，并指出2002年的《薩班斯-奧克斯利法案》（SOX）禁止這樣做。但這是錯(cuò)誤的，因?yàn)镾OX中沒有語言禁止披露接受檢查的公司的名稱。SOX禁止的是披露PCAOB針對(duì)不良審核所采取的調(diào)查和執(zhí)行措施。薩班斯參議員同意修訂當(dāng)時(shí)的SOX草案（2002年5月），其中包括禁止公開披露信息，直到PCAOB強(qiáng)制執(zhí)行行動(dòng)最終完成時(shí)，應(yīng)審計(jì)公司和代表他們進(jìn)行談判的Enzi參議員的要求。哈維·戈德施密德（Harvey Goldschmid）（不久后將成為美國證券交易委員會(huì)專員）和我懇請(qǐng)參議員不要做出這一改變，因?yàn)槊绹C券交易委員會(huì)（SEC）采取的執(zhí)法行動(dòng)不是私人的，而是實(shí)際上是公開的。參議員杰克·里德（D-羅德島州和格拉斯利（愛荷華州））引入了后來引入的立法，該法案在PCAOB的支持下過去是為了扭轉(zhuǎn)這種變化并公開行動(dòng)。不幸的是，與此同時(shí)，審計(jì)事務(wù)所使用SOX的這種隱藏，上訴和推遲行動(dòng)的規(guī)定直到很多年過去了，然后，審計(jì)公司總是發(fā)表公開聲明，從本質(zhì)上說，PCAOB的最終行動(dòng)已經(jīng)存在多年了，應(yīng)該忽略不計(jì)。應(yīng)審計(jì)事務(wù)所和代表他們進(jìn)行談判的恩茲參議員的要求。哈維·戈德施密德（Harvey Goldschmid）（不久后將成為美國證券交易委員會(huì)專員）和我懇請(qǐng)參議員不要做出這一改變，因?yàn)槊绹C券交易委員會(huì)（SEC）采取的執(zhí)法行動(dòng)不是私人的，而是實(shí)際上是公開的。參議員杰克·里德（D-羅德島州和格拉斯利（愛荷華州））引入了后來引入的立法，該法案在PCAOB的支持下過去是為了扭轉(zhuǎn)這種變化并公開行動(dòng)。不幸的是，與此同時(shí)，審計(jì)事務(wù)所使用SOX的這種隱藏，上訴和推遲行動(dòng)的規(guī)定直到很多年過去了，然后，審計(jì)公司總是發(fā)表公開聲明，從本質(zhì)上說，PCAOB的最終行動(dòng)已經(jīng)存在多年了，應(yīng)該忽略不計(jì)。應(yīng)審計(jì)事務(wù)所和代表他們進(jìn)行談判的恩茲參議員的要求。哈維·戈德施密德（Harvey Goldschmid）（不久后將成為美國證券交易委員會(huì)專員）和我懇請(qǐng)參議員不要做出這一改變，因?yàn)槊绹C券交易委員會(huì)（SEC）采取的執(zhí)法行動(dòng)不是私人的，而是實(shí)際上是公開的。參議員杰克·里德（D-羅德島州和格拉斯利（愛荷華州））引入了后來引入的立法，該法案在PCAOB的支持下過去是為了扭轉(zhuǎn)這種變化并公開行動(dòng)。不幸的是，與此同時(shí)，審計(jì)事務(wù)所使用SOX的這種隱藏，上訴和推遲行動(dòng)的規(guī)定直到很多年過去了，然后，審計(jì)公司總是發(fā)表公開聲明，從本質(zhì)上說，PCAOB的最終行動(dòng)已經(jīng)存在多年了，應(yīng)該忽略不計(jì)。
目前，法律規(guī)定，在不超過五年后，項(xiàng)目牽頭（負(fù)責(zé)）審計(jì)合伙人必須輪換。這是根據(jù)國會(huì)記錄為審核提供“新的眼光”。但是，可以有許多審計(jì)合伙人參與審計(jì)，而且發(fā)現(xiàn)牽頭合伙人輪換是不常見的，而過去一直在進(jìn)行審計(jì)的人又輪換擔(dān)任牽頭審計(jì)合伙人的職位。結(jié)果，激勵(lì)合作伙伴不要提出過去的新問題。鑒于上述引用的改革，可以免除這項(xiàng)與之相關(guān)的大量成本的要求。
要求上市公司的每位審計(jì)師都必須發(fā)布年度報(bào)告，就像他們需要進(jìn)行審計(jì)的公司一樣，其中必須包含：
根據(jù)公認(rèn)會(huì)計(jì)準(zhǔn)則（GAAP）編制的財(cái)務(wù)報(bào)表。這對(duì)于評(píng)估這些公司的財(cái)務(wù)狀況非常重要，因?yàn)閳?zhí)法機(jī)構(gòu)和監(jiān)管機(jī)構(gòu)的行動(dòng)已證明這些公司“太大而不能倒閉”。
討論公司關(guān)于審計(jì)各個(gè)方面的質(zhì)量控制，包括獨(dú)立性，人力資源（如雇用，培訓(xùn)和監(jiān)督），審計(jì)績效，選擇和保留所審計(jì)的公司以及測(cè)試和實(shí)施質(zhì)量控制。
與個(gè)人審計(jì)工作不同，在整個(gè)公司范圍內(nèi)討論審計(jì)質(zhì)量指標(biāo)。
討論公司的治理結(jié)構(gòu)，過程和程序。
歐盟委員會(huì)已經(jīng)要求每個(gè)大型審計(jì)公司提供一份包含這些信息的報(bào)告。美國審計(jì)公司確實(shí)會(huì)自行發(fā)布年度報(bào)告，但它披露的財(cái)務(wù)信息非常有限，而有關(guān)治理結(jié)構(gòu)，高管人員的責(zé)任以及績效衡量和改進(jìn)的信息也非常有限。
對(duì)超過100家上市公司進(jìn)行審計(jì)的審計(jì)公司應(yīng)被要求在公司董事會(huì)中具有獨(dú)立董事或成員。
審計(jì)事務(wù)所需要放棄他們今天用于人員配置的“金字塔”方案，并采用律師事務(wù)所中使用的超專業(yè)模型。金字塔結(jié)構(gòu)導(dǎo)致了才華橫溢，但年輕且經(jīng)驗(yàn)不足的員工被指派執(zhí)行審計(jì)程序，而員工在業(yè)務(wù)交易方面則準(zhǔn)備不足以進(jìn)行檢查和挑戰(zhàn)。
應(yīng)要求所有CPA都具有會(huì)計(jì)學(xué)碩士學(xué)位。我相信急需專業(yè)會(huì)計(jì)課程的碩士。大型審計(jì)事務(wù)所鼓勵(lì)學(xué)生離校并在其獲得碩士學(xué)位之前開始其職業(yè)的行為令人失望，因?yàn)檫@突出表明了這些事務(wù)所缺乏對(duì)教育的承諾。行動(dòng)勝于雄辯。
SEC應(yīng)修改其對(duì)審計(jì)委員會(huì)財(cái)務(wù)專家的定義，并采納其初步建議。美國證券交易委員會(huì)（SEC）應(yīng)澄清審計(jì)委員會(huì)，不得將此責(zé)任委托給公司管理層，今天通常這樣做。
Beginning with the passage of the 1933 Securities Act, Congress has required an Independent Audit for every public listed company in the United States. At the time the 1933 Act was debated by Congress, it was discussed as to whether to have audits performed by employees of the government. Banks regulated by the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) are all examined by government employed banking examiners. But in the end, the draft of the 1933 Act was modified to have the audits performed by a licensed accountant (CPA) who is “independent.” Today CPA’s who audit publicly listed companies are currently regulated by both the Securities and Exchange Commission and its Office of the Chief Accountant, and the Public Company Accounting Oversight Board (PCAOB).
There continue to be issues with the quality of audits performed by CPA’s. In October, 2008, a U.S. Treasury Committee on the Auditing Profession (ACAP) issued a report with many recommendations for the SEC, PCAOB, and auditing profession. This committee of business leaders, investors, former SEC regulators, and CPA’s studied the profession for a year before issuing its report. Yet today, ten years later, few of the recommendations have been acted upon by the audit firms, or their regulators. As a result, it appears the four large audit firms have become “two big to fail.” And many of those who are regulating the audit firms at the SEC or PCAOB have joined the regulators from these “Big 4” firms, and have returned to them, as highlighted in the recent action of the Department of Justice against auditors at KPMG.
Continuing issues affecting the credibility and trust in the auditing profession includes:
Lack of Independence—Auditors view management of companies they audit as their “client” not the public. It is important to audit partners that they maintain the “annuity” received from the annual audit fees. Losing an annuity from a large company can impact a partner’s career. As a result, the need to maintain a lack of bias and professional scepticism runs head on into, and conflicts with, the need to maintain the annuity for the firm.
Management provides them business opportunities to grow their revenues/profits.
Management writes their check.
Too often, in reality, audit committee’s delegate hiring and oversight of the auditor to management. Management and Audit Committees have often retained the same auditor for decades, even centuries, continuing to pay the annuity, and receiving “clean” audit reports.
Auditors have testified under oath in court, that they do not have an obligation to detect material financial statement fraud and serve the public interest.
Management provides the independent auditor with the accounting records and financial statements (numbers) to be audited. Then upon request from the independent auditor, management also provides the auditor with the evidence to support the numbers. When auditors talk of using “Big Data” in an audit, it too often is testing data in a data base created and maintained by management. As such, the numbers, and evidence and support the auditor examines, comes from the party that is the subject of the audit. It is doubtful that management is going to provide evidence that does not support the numbers they have created. Unfortunately, Generally Accepted Auditing Standards (GAAS) do not specifically address the need for the auditor to consider publicly available information that contradicts the information management has provided. And time and time again, it is this type of information that has resulted in analysts and other outside researchers bringing to light errors in financial statements and disclosures. And it is this information that auditors have failed to address in their audits.
The government mandates management and the company MUST buy audits, rather than those who actually own the company. In this respect, auditing of publicly listed companies is like a publicly mandated utility.
Lack of Transparency with respect to Audit Firm Performance and Audit Quality. Investors are not provided information necessary to inform them as to the quality of the audit of the financial statements and disclosures of the company they invest in and own. In that regard, investors are being asked to vote and ratify the auditor without information necessary to making an informed decision. Investors are consistently told in the audit report that audits have been done in compliance with GAAS set by the Public Company Accounting Oversight Board (PCAOB), a misleading statement in light of the very high deficiencies in compliance with GAAS reporting by the PCAOB and other audit regulators around the globe.
Lack of Independent Governance of Audit Firms. The large audit firms, which audit the vast majority of publicly listed companies in the US as well as around the globe, all lack meaningful independent governance. This lack of governance, which is required for publicly listed companies, has resulted in a lack of quality, accountability, transparency, and governance when it comes to audit quality and performance.
Very poor audits quality based on inspection reports from around the globe—so bad that the International Forum of Independent Audit Regulators (IFIAR) called senior leadership from each of the six largest firms in to discuss the poor audit quality. IFIAR’s Global Audit Quality (GAQ) Working Group and the GPPC networks undertook an initiative aimed to reduce the frequency of inspection findings. In accordance with a target established by the GAQ Working Group, the GPPC networks seek to improve audit performance, reflected in a decrease of at least 25%, on an aggregate basis across the GPPC networks over four years, in the percentage of their inspected listed PIE audits that have at least one finding. (See https://www.ifiar.org/)
The 2016 Inspection report of IFIAR stated: “Inspected audits of listed public interest entities (PIEs) with at least one finding remained unacceptably high at 42%.” (See here.)
Audit firms often state the deficiency rates are high because the regulators are picking “High Risk” audits which in some, but not all instances, is true. However, one would expect the audit firms to assign these audits to their very best auditors, and as a result, there would be fewer deficiencies.
And finally, audit reports have failed to convey to investors—as well as audit committees—concerns of the auditor, even when they know management and companies are violating laws and regulations. Such reports are required for auditors of governments that receive federal funds, but are not required in instances such as seen in recent years, for audits of companies such as Wells Fargo.
Reforms to establish accountability to investors as owners of the company, enhance transparency and accountability
Below are ideas to address the issues with poor audit quality on audits of publicly listed companies. Some of these ideas or recommendations were put forward ten years ago by the U.S. Treasury ACAP.
Remove the current requirement in the Securities Laws that a Company must have an audit by an independent auditor, thereby eliminating the federal government mandate.
Replace it with a market based requirement, that every 5 years, a shareholder proposal be included in the annual proxy, asking if the investors want an independent audit of the financial statements by the independent auditors. Accordingly, it would be made clear that independent auditors work for, and serve the public interest of the owners of the company—the investors. I would expect that investors most often would vote for an independent audit, unless they saw little value in having one.
If the stockholders do approve the independent audit requirement (and again, I think they almost always would):
The audit committee, not management, would select and nominate the auditor. This responsibility could not be delegated to management;
The stockholders would then be asked to vote on and approve the auditor;
The audit committee, not management, would then be tasked with and responsible for negotiating the fee to be paid to the auditor;
The audit committee would submit a bill for the audit fee to the PCAOB as necessary during the course of the audit.
The PCAOB would collect a fee from each public company to cover the bill of the auditor for the audit. The PCAOB already has a mechanism in place for collecting fees it is required to get from public companies
The PCAOB could require a company to tender their audit for proposal, if the PCAOB found the auditors had engaged in improper professional conduct as defined in SEC Rule 102(e), or had a material weakness in their own internal audit quality controls; or had significant deficiencies on an audit in which the auditor had failed to comply with GAAS as set by the PCAOB.
In no event, could the audit firm serve as auditor for a publicly listed company for a period longer than what is permitted today by the EC which is 20 years.
The new auditor report adopted by the PCAOB should be required on all audits of public companies. This new audit report will require the auditor to state and discuss in this new form of audit report, “critical audit matters” (commonly referred to as CAMS). The new audit report also requires the auditor to state: “A statement that PCAOB standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.”
However, the PCAOB exempted a wide swath of public entities and did not require communication of critical audit matters for audits of emerging growth companies (“EGCs”), brokers and dealers reporting under the Securities Exchange Act of 1934 (the “Exchange Act”) Rule 17a-5; investment companies (e.g., mutual funds), other than business development companies; and employee stock purchase, savings, and similar plans (“benefit plans”).
If auditors through their audit work, become aware of a company or management breaking a law or regulation, that could have a material impact on the financial statements or operations of a company, they should be required to disclose it in their report, just as an auditor of a governmental agency subject to the GAO Yellow Book auditing standards is required to do so.
In August, 2000, The Panel on Audit Effectiveness (O’Malley Panel) chaired by the former Chairman of PW recommended that each audit include a forensic segment of the audit. Consideration should once again be given to this recommendation including establishing within GAAS, the need for auditors to consider publicly available information that contradicts the evidence management has provided them.
Require disclosure of audit quality indicators for each auditon which an opinion of the auditor is provided to investors in the company. These indicators should be disclosed in the Company’s proxy as part of the Company’s audit committee report to investors. Audit committees should also be required to disclose either in the proxy, or in the Charter of the Committee, the committees procedure for periodically tendering the audit. Audit firms should already be measuring audit quality on individual audits if in fact they are managing audit quality. But the audit inspection results from around the globe provide some evidence, that has not be occurring.
Improving the transparency of the PCAOB. The PCAOB inspects a very small percentage of the audits of publicly listed companies each year, and provide a public inspection report for each firm with their findings. For those audits inspected, the PCAOB inspection reports are perhaps the best indicator of audit quality today. Yet the PCAOB has refused to provide the name of companies being audited, stating the Sarbanes-Oxley Act of 2002 (SOX) prohibits this. But that is false as there is not language in SOX that prohibits the disclosure of the name of the companies whose audits are inspected. What SOX does prohibit is disclosure of investigations and enforcement actions taken by the PCAOB with respect to a poor audit. Senator Sarbanes agreed to an amendment of the then draft of SOX (May 2002), to include a prohibition on public disclosure, until the PCAOB enforcement action is final, at the request of the audit firms and Senator Enzi who was negotiating on their behalf. Harvey Goldschmid, who would shortly thereafter become an SEC Commissioner, and I, pleaded with the Senator not to make this change, as enforcement actions taken by the SEC are not private, but are in fact public. Senator Jack Reed (D-Rhode Island and Grassley (R-Iowa) have introduced subsequently introduced legislation, supported by the PCAOB in the past, to reverse this change and make the actions public. Unfortunately, in the meantime, the audit firms have used this provision of SOX to hide and appeal and delay the actions until many years have gone by. Then the audit firm always makes a public statement that in essence says a final PCAOB action is years old and should be ignored.
Currently the law requires that an audit partner be rotated off as the lead audit partner for a company, after no longer than five years. This is to provide a “fresh set” of eyes to the audit according to the congressional record. Yet there can be a number of audit partners on an audit, and it is not uncommon, to find the lead partner rotated off, and one who has been on the audit in the past, rotated into the lead audit partner position. As a result, there are incentives for partners not to bring up new problems from the past. Given the reforms cited above, this requirement, which has significant costs associated with it, could be eliminated.
Require each auditor of public companies to issue an annual report, just as the companies they are required to audit must, containing its:
Financial statements prepared in accordance with generally accepting accounting principles (GAAP). This is important to assessing the financial health of these firms as they have become “too big to fail” as demonstrated by actions of law enforcement agencies and regulators.
A discussion of the firms quality controls regarding all aspects of the audit including independence, human resources such as hiring, training and supervision, performance of audits, selection and retention of companies they audit, and testing and enforcement of the quality controls.
A discussion of the firm wide, as opposed to individual audit engagement, audit quality indicators.
A discussion of the firm’s governance structure, process and procedures.
The European Commission already requires each of the large audit firms to provide a report with some of this information. The US audit firms do publish an annual report on their own, but it discloses very limited financial information, and limited information on governing structures, accountability of executives, and performance measurement and improvement.
Audit firms that audit more than 100 public companies should be required to have independent directors or members on the firm’s governing board.
Audit firms need to abandon the “Pyramid”scheme they use for staffing today, and adopt a paraprofessional model used in law firms. The pyramid structure has resulted in talented, but young and inexperienced staff assigned to perform audit procedures, with respect to business transactions the staff are ill prepared to examine and challenge.
All CPA’s should be required to have a master’s degree in accountancy. I believe the master of professional accountancy program is sorely needed. The actions of the large audit firms in which they encourage students to leave school and begin their careers before the student receives their master is disappointing in that it Highlights the lack of commitment to education by those firms. Actions speak louder than words.
The SEC should revise its definition of what is a financial expert on the audit committee and adopt its initial proposal. The SEC should clarify the audit committee MAY NOT delegate this responsibility to the management of the Company, which is often done today.
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