PCAOB to Look at Reasons Behind Audit Firm Firings

A member of the Public Company Accounting Oversight Board (PCAOB) put corporate America on notice this week, announcing that if a company fires its auditor, the Board is going to want to know why.

After the accounting scandals of recent years, the PCAOB is going to be suspicious that auditors are being fired because they are unwilling to sign off on accounting that pushes the boundaries of acceptable practice.

Charles D. Niemeier issued the warning while participating in a panel discussion at the Directors' Institute on Corporate Governance in Boston, earlier this week.

Niemeier’s comments, reported by the Associated Press, focused on the relationship between audit committees and corporate boards, which has undergone fundamental changes due to the 2002 Sarbanes-Oxley Act. The PCAOB was created by the act to oversee the auditing of publicly held companies.

The act also put responsibility of hiring independent auditors on the shoulders of corporate audit committees who also receive audit reports. The PCAOB has recently begun inspections of the nation’s Big Four accounting firms and will be looking closely at every firm that audits publicly held companies as part of a sweeping registration and inspection effort. Domestic audit firms have until Oct. 22 to register with the PCAOB.

Dow Jones Newswires reported that some of the recent accounting scandals began with what Niemeier called "earnings management."

"Be very, very careful when you hear that," he said. "It may not be painful to anyone but you. The most important thing is to actually deal with it and confront it. Don’t let it be buried."

Niemeier acknowledged the inherently adversarial relationship that corporate officers and boards have with their auditors, but said that despite these clashes, "there are plenty of times (companies) wanted to change auditors because they weren't being given the answer they wanted."

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.