Wednesday, October 12, 2011
Getting Your CPA Exam Scores Faster
Beginning this month, CPA Exam scores will now be released faster. The AICPA has published a schedule for the fourth quarter of 2011, outlining the new dates on which you can expect to receive your results. This is great news for CPA Exam candidates, as you can now better plan your strategy for tackling all four section within the 18 month window. The biggest challenge in planning your studies is waiting for the results of your previous section before fully committing to sit for the next one. Good luck to all the Exam candidates out there!
Exposing Engagement Partners?
On October 11, 2011, the PCAOB released for comment a proposal to require auditors to disclose the name of the audit engagement partner in a company's annual report, as well as other firms or persons not employed by the audit firm who participated in the independent audit of the company. The PCAOB considers this proposal an augmentation of transparency in the audit of public companies.
While I can certainly understand the argument that identification of an individual partner would increase that person's obligation to adhere to all professional standards and the highest ethical guidelines in overseeing an audit, I feel it might further confuse investors. If a company goes under, investors will simply have another person to personally crucify for any fatal risk that may have led to the downfall. While I am not a lawyer, I can foresee a host of legal issues when investors start assuming that an individual partner is solely responsible for their bad investment. The entire structure of the LLC used by public accounting firms is overshadowed by the engagement partner's name in the audit report.
In considering the second item in the PCAOB's proposal, I think it would be helpful to know when something has been outsourced. Consider the recent mess many homeowners facing foreclosure are now dealing with, as they find out that their bank outsourced the processing of their loan to companies who made up signatures and bank presidents to sign false loan documents. Investors certainly deserve to know to what extent a reputable auditor may be relying on the work of a less reputable auditor. Simply naming firms used by the auditor would not necessarily be helpful, unless the extent of their involvement were disclosed. Perhaps setting a threshold for disclosure would be reasonable, e.g. if a third party is involved in the audit of a high risk area or conducts more than 20% of the audit, their involvement should be disclosed.
What do you think, will the added scrutiny of disclosing engagement partners and third parties involved in the audit improve transparent financial reporting and auditing?
While I can certainly understand the argument that identification of an individual partner would increase that person's obligation to adhere to all professional standards and the highest ethical guidelines in overseeing an audit, I feel it might further confuse investors. If a company goes under, investors will simply have another person to personally crucify for any fatal risk that may have led to the downfall. While I am not a lawyer, I can foresee a host of legal issues when investors start assuming that an individual partner is solely responsible for their bad investment. The entire structure of the LLC used by public accounting firms is overshadowed by the engagement partner's name in the audit report.
In considering the second item in the PCAOB's proposal, I think it would be helpful to know when something has been outsourced. Consider the recent mess many homeowners facing foreclosure are now dealing with, as they find out that their bank outsourced the processing of their loan to companies who made up signatures and bank presidents to sign false loan documents. Investors certainly deserve to know to what extent a reputable auditor may be relying on the work of a less reputable auditor. Simply naming firms used by the auditor would not necessarily be helpful, unless the extent of their involvement were disclosed. Perhaps setting a threshold for disclosure would be reasonable, e.g. if a third party is involved in the audit of a high risk area or conducts more than 20% of the audit, their involvement should be disclosed.
What do you think, will the added scrutiny of disclosing engagement partners and third parties involved in the audit improve transparent financial reporting and auditing?
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