Public Company Accounting Oversight Board member Steven Harris said the major auditing firms should begin providing their own financial statements to the PCAOB.
“As the major firms continue to offer more services, they have become larger and more essential to the economy,” Harris said in a speech last week at American University’s Kogod School of Business. “The Big Four in the U.S. had combined revenue for 2013 of approximately $39.8 billion, and alone audit approximately 98 percent of the U.S. market by capitalization.”
He noted that in 2008, the Bush Administration's bipartisan Treasury Department Advisory Committee on the Auditing Profession recommended that the larger auditing firms submit audited financial statements to the PCAOB, and the committee co-chairs recommended that at least the largest auditing firms make their audited financial statements available to the public.
“Certain jurisdictions currently require accounting firms to provide such audited financial statements,” said Harris.
He pointed out that accounting firms in the United Kingdom, the Netherlands and Austria already include audited financial statements in the annual transparency reports they post on their Web sites.
“Many find it ironic that auditing firms in the United States, whose business is providing assurance about the transparency provided by others, resist publicly providing their own financial statements,” he said. “I see no apparent reason that the auditing firms that act as gatekeepers to our securities markets should not be as transparent to investors as the companies they audit. The board, in my opinion, should similarly require audited financial statements from the profession in order to better monitor and identify trends and potential risks that may affect audit quality.”