Sprint Shareholders Vote on Controversial Retention of Auditor

Hot on the heels of recent scandals involving Sprint Corporation executives and the tax shelters they purchased from Big Four accounting firm and auditor Ernst & Young, shareholder's at Sprint's annual meeting voiced a significant objection to the retention of E&Y as auditor for another year.

While the majority voted to keep E&Y, a resounding 38% voted to oust the auditor, an amount that pleases representatives from the AFL-CIO. The union had actively encouraged members to vote against the retention of E&Y, calling the dual relationship of E&Y as Sprint auditor and financial advisor to the company's executives, an "egregious conflict of interest." AFL-CIO deputy director for the group's Office of Investment indicated he believed any vote over 25% against E&Y is a victory for the union.

Sprint CEO Gary D. Forsee has promised to seriously consider the strong negative vote. "It is clear shareholders have spoken," said Mr. Foresee.

Sprint's former CEO, William T. Esrey, and former president, Ronald T. LeMay, are under investigation by the Internal Revenue Service for their participation in a tax shelter they purchased from and on the advice of E&Y. The two were dismissed from their jobs at Sprint earlier this year.

AFL-CIO secretary-treasurer Richard Trumka has been waging a campaign against the Securities and Exchange Commission to prohibit auditors from consulting on executive compensation. He said:

"By advising the board on executive compensation, an auditor is in effect evaluating the performance of that executive, a role that could make an auditor reluctant to draw attention to possible shortcomings by that executive in the future. Alternatively, if the auditor advises the executive on his or her compensation, the auditor is acting as an advocate for the executive, a role that conflicts with the auditor's duty to shareholders."

Sprint shareholders also voted to prevent independent auditors from providing financial services to members of Sprint's audit committee and executive directors, and they voted that Sprint should not be liable for paying for tax compliance services for company executives unless the services are available to all Sprint employees.

You may like these other stories...

The Public Company Accounting Oversight Board (PCAOB) on Tuesday adopted a new auditing standard and amendments in three areas of the audit that could pose an increased risk of material misstatement in company financial...
Read more from Larry Perry here and in the Today’s World of Audits archive.In my last article, I presented an overview of one of the first steps in the preplanning phase of an audit engagement: reviewing prior year...
Read more from Larry Perry here and in the Today’s World of Audits archive.AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (SPFs),...

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.