Unions Push Audit Reforms at More Companies

Johnson & Johnson and Bristol-Myers Squibb Company agreed to stop hiring the same accounting firm for auditing and consulting after prodding from unions led by the United Brotherhood of Carpenters. The unions are trying to achieve the same result at Avon Products and as many as 27 other companies. Ann Yerger, research director at the Council of Institutional Investors, said the union campaign is "one of the most powerful proxy initiatives ever."

The unions began to study the issue of auditor independence last November before Enron's bankruptcy. They found the ratio of non-audit to audit fees in some companies was as high as 16 to 1. The unions are trying to take credit for winning policy changes through negotiation. But some companies, including Walt Disney and Johnson & Johnson, say they made the policy changes on their own.

Johnson & Johnson changed its policy in January 2002 to prohibit hiring an auditor for consulting. The board's audit committee says the change was independent of the unions' push and "in response to public criticism about the integrity of independent audits." In 2001, according to Bloomberg, Johnson & Johnson paid PricewaterhouseCoopers $9 million for an audit and $57.8 million in consulting fees.

More recently, Bristol-Myers Squibb and FirstEnergy Corp. changed their policies after talks with the unions. According to Bloomberg, Bristol-Myers paid PricewaterhouseCoopers $2.8 million for its 2000 audit and $22.9 million in consulting fees. FirstEnergy, which plans to include details of its new policy in its April proxy statement, paid Arthur Andersen $893,300 for its 2000 audit and $5.3 million in consulting fees.

Still bucking the trend, an Avon spokesman said the proposal would be in the proxy for its May 2 annual meeting. But Avon recommends investors vote against it. In 2000, the world's largest direct seller of cosmetics paid $3 million to PricewaterhouseCoopers for its audit and $8.8 million for consulting.

The unions involved include the International Brotherhood of Electrical Workers, the United Association of Plumbers and Pipefitters, and the Sheet Metal Workers.

-Rosemary Schlank

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...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.