Looking Out For Me, Myself, And IBy Francine • Mar 15th, 2009 • Category: KPMG, Latest, PCAOB, Pure Content, Sarbanes-Oxley
It’s been a whirlwind weekend, after a very busy week. I have been posting comments almost constantly. It seems that KPMG, and now Deloitte again, are cutting more people. You have been using this blog as a gathering place, both to get information and to disseminate new information, including lots of advice from those who have already been through an involuntary termination.
It’s very gratifying.
There is at least one person who doesn’t have to worry about having a good job, at KPMG no less. Thomas Ray was the Chief Auditor and Director of Professional Standards for the PCAOB.
According to WebCPA:
Ray is joining KPMG as a partner in the firm’s department of professional practice in New York.
According to the PCAOB official press release:
The principal responsibility of the Office of the Chief Auditor is to advise the PCAOB Board members on the establishment of auditing and related professional practice standards. As such, Mr. Ray was actively involved in and oversaw the development of all of the auditing standards developed, proposed and adopted by the Board.
Mr. Ray was instrumental in designing the Board’s auditing standards to implement Section 404 of the Sarbanes-Oxley Act of 2002…the development of the suite of seven proposed new standards related to the auditor’s assessment of and response to risk in an audit… [and] was actively involved in the development of the Board’s Ethics and Independence Rules…
Prior to joining the PCAOB staff, Mr. Ray was a partner with KPMG LLP in their department of professional practice in New York. Prior to joining KPMG, he was director of auditing standards at the American Institute of Certified Public Accountants. He began his public accounting career with Grant Thornton LLP.
I got a nice personally signed letter from Tom, once upon a time.
I will treasure it always.
I met Mr. Ray last June at the Compliance Week Annual Conference.
At the Compliance Week Conference earlier this month, I asked Tom Ray about the push on the part of some “activist accountants” – an oxymoron if there ever was one – to change the rules about who signs audit opinions. Some (including me) think that the individual responsible partner should be signing the report. This recommendation (not proposal, in carefully worded language by ACAP) was made recently by the Treasury’s Advisory Committee on the Auditing Profession.I mentioned to Mr. Ray that, in contrast to lawyers, it’s very difficult to get information about individual partners and their clients from the audit firms. Unless someone is a frequent public speaker or a frequent author of whitepapers, (in other words an anointed spokesperson for the firm,) you’d be hard pressed to find an email address or proof of employment, let alone a resume or photo.
The PCAOB today voted to repropose for comment an auditing standard on Engagement Quality Review (EQR). The Board first proposed a new standard on EQR on February 26, 2008.
Since then, the Board has made extensive changes to the original proposal and is now seeking comment on the revised EQR standard.
Yeah, extensive changes I’m sure. I sat through the meeting where the original proposal was discussed.
The discussion was broader than what is now covered by the PCAOB’s latest proposed standard over concurring partner opinions. Even though many lament the addition of even more standards and codes where good approaches seem to exist, the PCAOB is a regulatory body and has an obligation to formalize their interim standards. This is one of them. A long standard, covering only how and when a concurring partner review is necessary, how that must be documented, and how to judge the integrity, independence, competence and objectivity of the reviewer, may seems excessive to the naive.
However, in the environment I just witnessed on Wednesday, with several different competing interests, all positioning themselves, bloviating on their position and then sitting back self-satisfied and reluctant to compromise, any precision on what will be reviewed and how can only help. I applaud the PCAOB for taking these baby steps, and pinning the son of a guns down on these issues, one by one.
The proposed standard would apply to all engagements performed in accordance with the standards of the PCAOB. In addition to requiring certain specified procedures, the proposed standard requires the engagement quality reviewer to assess whether there are areas within the engagement that pose a higher risk that the engagement team failed (1) to obtain sufficient competent evidence or (2) to reach an appropriate conclusion. In such areas, the engagement quality reviewer should evaluate whether the engagement team responded appropriately to the assessed risks, the judgments made were reasonable, and the results of the procedures performed support the engagement team’s overall conclusions.
Furthermore, the proposed standard includes a new requirement that the engagement quality reviewer must satisfy before providing concurring approval of issuance…Under the proposed standard, the reviewer must not provide concurring approval of issuance if he or she knows, or should know based upon the requirements of the standard, that the engagement team failed to obtain sufficient competent evidence, the engagement team’s overall conclusion or report is inappropriate, or the firm is not independent of its client…
EC12. Post-Employment Restrictions
(a) Negotiating Prospective Employment
(1) Board members and professional staff may not negotiate prospective employment with a public accounting firm or issuer, without first disclosing (pursuant to the procedures in Section EC8(b)) the identity of the prospective employer and recusing himself or herself from all Board matters directly affecting that prospective employer.
(2) For purposes of this section, “negotiating prospective employment” means participating in an employment interview; discussing an offer of employment; or accepting an offer of employment, even if the precise terms are still to be developed. Submitting a resume or job application to a group of employers or receiving an unsolicited inquiry of interest that is rejected, do not alone constitute “negotiating prospective employment.”
(b) Prohibition on Practice Before the Board or Commission
(1) Board members and professional staff shall be restricted from practice before the Board, and the Commission with respect to Board-related matters, for one year following termination of employment or Board membership.
(2) Former Board members and professional staff shall not practice before the Board, or the Commission with respect to Board-related matters, on a particular matter in which the Board member or professional staff participated personally and substantially as a Board or staff member and which involved a specific party or specific parties at the time of such participation.
Photo is not actually Tom Ray. Could not find one that did his preppy, good-boy looks ample justice. It’s Hank Paulson circa 1973, courtesy of Fortune, via Dealbreaker.com