Voices of Reform: Get Out of Tax, Get Out of Audit, Shape up!
These are confusing times for accountants. As the accounting profession jockeys to identify and secure its proper place in the financial universe, conflicting messages continue to emanate from the leaders of the profession.
Paul Volcker Calls For an End to High End Tax Work
In an interview this week with the Financial Times, former Fed Chairman Paul Volcker called upon the Public Company Accounting Oversight Board to ban audit firms from performing tax work for audit clients. "You can run into a real conflict if the auditor has to audit the tax planning of the company," said Mr. Volcker.
Mr. Volcker, who at this time last year was advocating that the ailing Andersen accounting firm become the model "audit-only" firm, still feels strongly that audit firms should back away from corporate finance, legal and tax services and focus on one core audit service, without any independence conflicts.
Deloitte Chief Contemplates Getting Out of the Audit Business
Deloitte Touche Tohmatsu chairman Piet Hoogendoorn warned over the weekend that exposure to lawsuits was forcing global accountancy firms to consider abandoning statutory audit work.
Our Dutch sister site AccountingWEB.nl reported that in his role as chairman of the Netherlands professional body NIVRA, Hoogendoorn voiced his concerns in an interview with the 'Het Financieele Dagblad' newspaper.
The big global firms were thinking about quitting the audit market because of the difficulty of getting professional indemnity cover. Insurers who were willing or able to provide cover could be counted on the fingers of one hand, he said.
Although Mr. Hoogendoorn's comments may be more politically motivated due to concerns stirred up over Dutch retailer Ahold's financial misrepresentations, it nevertheless represents a shot across the bow as to how audit reforms will be played out in the future, and whether there is a viable business model left for accounting firms to pursue.
Arthur Levitt to CFOs: Show Some Backbone
At his latest stop in a speaking tour to financial professionals, former SEC Chairman Arthur Levitt told a group of CFO's this week to "set the standard" and "provide moral and ethical leadership. Bring a dose of reality to your hard-charging CEOs." He implored the audience to resist the "culture of seduction" to fudge the numbers in favor of personal gain, and to let investors really know how a company is doing, without bending to Wall Street's expectations.
In his crusade to help restore investor confidence, Arthur Levitt's message to America's CFO's is clear: Do The Right Thing.
And The Last Word From Investment guru Warren Buffett
Warren Buffett's eagerly awaited Annual Letter to Shareholders released this week has some unique insight on corporate governance, financial reporting, and auditor responsibilities. Here's a sneak preview on Mr. Buffett's insight on curbing CEO compensation:
"The acid test for reform will be CEO compensation. Managers will cheerfully agree to board 'diversity,' attest to SEC filings and adopt meaningless proposals relating to process. What many will fight, however, is a hard look at their own pay and perks. In recent years compensation committees too often have been tail-wagging puppy dogs meekly following recommendations by consultants, a breed not known for allegiance to the faceless shareholders who pay their fees."