Comments on: Upcoming Interviews http://retheauditors.com/2008/03/18/upcoming-interviews/ The Business of the Big 4 Audit Firms Mon, 06 Feb 2012 19:29:11 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Anonymous http://retheauditors.com/2008/03/18/upcoming-interviews/comment-page-1/#comment-440 Anonymous Wed, 19 Mar 2008 07:10:00 +0000 http://76.12.174.187/?p=622#comment-440 Perhaps your interviews touched upon "forward looking" issues (versus bashing the profession for real or perceived past mis-deeds). I believe that one emerging / important issue for the auditing profession concerns the "leverage model" that are used on audit engagement teams. Simply stated, leverage is the mix of the team; how many hours are partner, manager, senior, staff.<br/><br/>With the emergence of AS5, which is being sold by the PCAOB as top-down, risk based, one would assume there would implications for the leverage model, and that a rational outcome would be a higher mix of partner/manager hours. Also, the rise of complicated, and still unresolved, issues concerning fair value accounting should also be impacting the leverage model.<br/><br/>Wondering aloud if this is in fact the way in which the big audit firms are thinking. What sort of real life trends have there been since the adoption of SOX? Will the pressure for maintaining profitability in a higher cost environment combined with the need to expand the business base (e.g., selling IFRS) create an environment of higher leverage (more staff hours relative to management hours).<br/><br/>Wonder what the PCAOB think an appropriate model would look like for various client profiles, and is there any correlation to (dare I say) audit quality. <br/><br/>Final Four Guy Perhaps your interviews touched upon “forward looking” issues (versus bashing the profession for real or perceived past mis-deeds). I believe that one emerging / important issue for the auditing profession concerns the “leverage model” that are used on audit engagement teams. Simply stated, leverage is the mix of the team; how many hours are partner, manager, senior, staff.

With the emergence of AS5, which is being sold by the PCAOB as top-down, risk based, one would assume there would implications for the leverage model, and that a rational outcome would be a higher mix of partner/manager hours. Also, the rise of complicated, and still unresolved, issues concerning fair value accounting should also be impacting the leverage model.

Wondering aloud if this is in fact the way in which the big audit firms are thinking. What sort of real life trends have there been since the adoption of SOX? Will the pressure for maintaining profitability in a higher cost environment combined with the need to expand the business base (e.g., selling IFRS) create an environment of higher leverage (more staff hours relative to management hours).

Wonder what the PCAOB think an appropriate model would look like for various client profiles, and is there any correlation to (dare I say) audit quality.

Final Four Guy

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