CPA Service Group

Two Big Four firms hired as part of bailout effort

We've noted in FierceFinance that the broad TARP has attracted more than a few asset management firms vying to help the Treasury Department buy and sell troubled assets. Thus far, the Treasury seems bent on investing in such securities soon, even though the bank investment effort has taken over as the main priority.

Accounting firms have gotten in on the action as well. The Treasury has retained PricewaterhouseCoopers and Ernst & Young. PricewaterhouseCoopers will act as auditor for the program and Ernst & Young will provide general accounting support--which raises some interesting accounting issues. How will the United States account for illiquid securities going forward? Will it follow private sector practices? Will Sarbanes-Oxley drive its reporting practices? Will Henry Paulson be asked to "sign off" the way CEOs are now required? This could get interesting.  

For more:
- here's a Forbes.com article

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PCAOB takes PwC to task

There has been a lot of talk about how the new Sarbanes-Oxley, as rendered in the PCAOB's AS5, will ease the burden and make audit firms less conservative in their approach. But you have to wonder, despite all the talk of a principles-based system, if that is really possible. Consider the scolding that PricewaterhouseCoopers just took from the PCAOB. (It should be said that other accounting firms regularly take similar medicine.) The PCAOB review found various GAAP errors, instances where standard audit procedures were not followed, cases of improperly documented work, and so on. PwC takes issue with a lot of the critique, but the point is that when it comes to audits, audit firms have every reason to be a big pain in the butt.    

For more on PwC and the PCAOB:
- here's a cfo.com article

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Audit conflicts must go!

We recently suggested it would be a good idea for firms to get rid of all potential conflicts of interest in the audit process regarding directors or executives. We noted the case of Feldman Mall Properties, which hired an accounting firm owned by one of the directors. As it turns out, the Public Company Accounting Oversight Board is moving on this issue, according to cfo.com. It seems to favor a rule that would require accounting firms to inform audit committees about any potentially tricky relationship. Anyone in an important financial role that might be able to influence the auditor would be required to disclose the relationship. Only then would a contract be allowed. In many ways, this seems like a no brainer. Audit committees need all the information they can get about these sorts of relationships before making decisions.  

For more:
- here's the cfo.com article

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