FEI CFRI – Unexpected Pleasures Part 2By Francine • Nov 25th, 2008 • Category: Pure Content
The speeches at the FEI conference were all great and I have quite a few more Twitter excerpts to reprint, along with more thoughtful commentary now that I have had a few days to reflect. So, more dispatches to come, including a magnum opus on “going concern” and theories of auditors’ liability.
2008-11-18 18:33:00.250 GMT
By Ian Katz
Nov. 18 (Bloomberg) — Securities and Exchange Commission Chairman Christopher Cox said accounting rulemaking must remain free of political and industry interference if U.S. companies are to begin following international standards.
She covers FASB. She quoted me in her article, but I do not have a link for it yet and it is subscription only.
“Today the U.S. investor gets three years of information,” White continued, saying that if companies transition by 2014, as proposed, they would likely have to report results in IFRS for the two previous years.
White’s comments at a Financial Executives International conference in New York stood in stark contrast to concerns expressed by executives at the conference on Tuesday.
“I don’t think this is a particularly good time, given the economy to begin this massive … move to IFRS,” Talia Griep, vice president and controller at manufacturer Honeywell International Inc (HON.N: Quote, Profile, Research, Stock Buzz) said on Monday. “It’s just a tall order to ask for any group of executives.”
To make the switch, Griep estimated her company would have to begin running parallel sets of accounting books, in U.S. Generally Accepted Accounting Principles and IFRS by January, 2012 — a move that would require more training, technology and other costs for her accounting staff.
On Tuesday, the SEC’s White acknowledged many companies would prefer to run two sets of books “rather … than go back and reconstruct,” their financials…
Susan Webster and BNA also provide targeted accounting policy and regulatory updates to their subscribers via the bi-weekly Accounting Policy and Practice Report and their Daily Report for Executives.
Days after the Securities and Exchange Commission proposed a “roadmap” towards mandatory use of international accounting standards by public companies in the United States, the agency’s chief Nov. 18 articulated five principles that those standards must meet to unite global capital markets and to function as a powerful investor tool.
While wholly supporting sustained cooperation with his agency’s foreign counterparts, SEC Chairman Christopher Cox rejected the idea of a global securities regulator, or what he termed a “global systemic risk ‘czar’.” Addressing an audience at a financial reporting conference in New York, Cox commended regulatory convergence, but said “identical” regulation would be inadvisable due to “differences in national laws, economic conditions, and objectives.”
To others, of course, global economic conditions recently have appeared more similar than different. World leaders, for instance, have urged global approaches to financial regulatory reform. Indeed, European leaders at the Nov. 15 Group of 20 summit proposed a global “college of supervisors” to regulate the largest global financial institutions.
NEW YORK–The chairmen of the International Accounting Standards Board and the Financial Accounting Standards Board vowed continued close cooperation Nov. 17 in further rulemaking, to respond to the current global financial crisis, and to prevent situations such as the in October that led IASB’s chief to seriously weigh resigning.
“The idea is that we’ll actually move together — if we move,” IASB Chairman David Tweedie said of such joint rulemaking at a news conference at a financial reporting conference of Financial Executives International.
“But it’s going to be done together and it’s going to be done with due process,” added Tweedie, after he and FASB Chairman Robert Herz spoke together in tag-team fashion at the FEI event. Tweedie also gave a separate speech.
Tweedie and Herz described a significant alignment of the boards’ workplans intended not only to achieve a long-sought-after convergence on a single set of global accounting standards. That goal also is favored by the Securities and Exchange Commission, as shown in the formal proposal Nov. 14 for the regulators’ potential acceptance of US public companies’ filings cued to IASB standards (see related report in this issue).
Tweedie, especially, also suggested the need for the boards to work closely together to help reduce the effectiveness of outside pressure. Such pressure could drive a wedge between the boards on rulemaking, potentially resulting in retreats or in more shifts from accounting standards and calls for short-cutting of due process sparked by politics.
There is very little.
This conference was well attended by major media because SEC Chairman Cox, several of his senior staff, the head of FASB and the head of IASB were speaking. Chairman Cox did not stick around for the press briefing and read a very prepared speech that the journalists said they would routinely get in advance. The press briefings were a chance to get something original and fresh. But the focus was the SEC, the accounting standards as they relate to the crisis, not the Big 4 firms. As a matter a fact, the SEC staff cringed when I asked a question about the Big 4. (That’s a future post.)
Jonathan Weil does a great job covering specific stories and has done a fantastic job skewering a particular accounting firm on occasion. Joe Nocera or Floyd Norris at the New York Times? Interesting stories, some good and some mention the auditors occasionally, but they’re dilettantes when it comes to covering the Big 4. And occasionally someone gets a story right and points the finger squarely at a firm, such as in the case of EY and WalMart’s tax scams. However, Reuters, Bloomberg, Dow Jones/WSJ, Chicago Tribune, Newsweek, and US News and World Report? None have a reporter covering the Big 4 as an industry on a regular basis.
In my opinion, many stories that mention the audit firms are simply a regurgitation of facts with very little investigative or critical reporting. Or they are a direct feed from the firms’ public relations/communications professionals.
I asked the question quite a few times as journalists wandered in and out of the press room on Monday and Tuesday and again at dinner with Edith, Susan and Steve on Monday night. In no particular order, I came up with these possible reasons, not to be attributed to anyone in particular:
1) General cutbacks over the years since Enron at most US newspapers means that “less sexy” beats get eliminated and coverage is therefore reactive.
2) Although I can imagine it’s no party to “cover FASB”, it seems that the audit firms are unfairly deemed boring by the media. Most stories are a reaction, a slow one, when something unavoidable hits.
3) Most media covers law firms and the legal profession as an industry, devoting blogs and specialized coverage to their ins and out. The WSJ has a blog for everything, including a Law Blog. Everything is “blog-worthy” except the audit firms. This is even though the reach and government sanctioned oligopoly in the capitalist market structure of the audit firms makes the Big 4 an ubiquitous, albeit an opaque, presence in every public and most private companies’ activities and transactions. Maybe it’s because lawyers are more apt to disclose their clients and cases to reporters and to give open interviews.
4) There’s a growing perception that auditor certified financial statements are worthless. Maybe the financial crisis has proved this to be true, since regardless of auditors’ non-qualified opinions on recent financial statements, large companies are “suddenly,” catastrophically, and dramatically imploding and failing.
5) Not long after the intrigue of Enron and the non-stop coverage of the role Arthur Andersen played in its demise, curiosity about the firms, their structure, their inner workings, their business model substantially diminished.
6)The PR and communications professionals from the audit firms, as well as industry lobbyists such as Center for Audit Quality, do an excellent job spoon feeding often time pressed, stretched, and sometimes non-intellectually curious journalists one side of the story, which the journalists are happy to reprint verbatim, with no critical analysis.
7) Big 4 Audit firms are not appreciated by the average journalist or editor as a standalone industry. They are much larger than any global law firm, with a unique business model and government sanctioned franchise that earns them more than a hundred billion dollars of revenue worldwide each year.