PCAOB May Probe Audit Firms’ Role in Financial Crisis

The Public Company Accounting Oversight Board heard from members of its Investor Advisory Group that they should be looking more closely at auditing firms to see what role they played in the financial crisis.

At the meeting Wednesday, Barbara Roper, a member of the group who also serves as director of consumer protection at the Consumer Federation of America, said, “Auditors failed to perform their basic watchdog function in the financial crisis,” according to Reuters. “There’s a need to find out why they failed to perform that function and what can be done to fix the problem.”

In one presentation at the meeting, entitled, “The Watchdog that Didn’t Bark…Again,” members of the group noted, “While auditors did not cause the financial crisis, it is difficult to look at the list of failed institutions that received an unqualified audit just months before they failed and conclude that auditors didn’t play a role.”

Skepticism seems to be spreading among investors about audit reports. The advisory group found in another presentation on improving the auditor’s report, as the Going Concern blog noted, that 18 percent of respondents in a recent survey believe the auditor’s report is of no use at all.

The PCAOB is looking into revamping the format of the auditor’s report to make it more useful and informative. That sounds like a good idea so the watchdog can start barking again before the next financial crisis happens.