There were two news items on the WebCPA newswire last Thursday that fascinated me. It wasn't the content of either that I found exciting. However, what was remarkable is the coincidence of these two events happening on the same day.

The first piece was entitled "PwC Vice Chair on Why Auditors Resign." Speaking at a forum on auditor independence at NYU's Stern School of Business in New York City, John O'Connor, vice chairman of services at PricewaterhouseCoopers, gave the three primary reasons why his firm resigns as an auditor. He said it happened 500 times in 2003 and the top reasons were:

1. A failure of the company to manage risk properly;
2. Lack of profitability for PwC; and,
3. Dissatisfaction with how PwC personnel are being treated.

The second WebCPA newswire item was entitled "SEC Settles with Warnaco, PwC"

It was a report that the Securities and Exchange Commission settled charges against apparel manufacturer The Warnaco Group Inc., three of its top executives, and its former auditor, PricewaterhouseCoopers. The SEC had charged PwC with aiding and abetting Warnaco's reporting violations in its 1998 annual report. PwC paid $2.4 million to settle the charges without admitting or denying the SEC's allegations.

Which is the true picture? At the NYU event, you see an auditing firm not afraid to distance itself from clients with which it feels uncomfortable. But that is quickly contrasted by the same firm paying $2.4 million in what the SEC would surely label as an "audit failure."

Maybe they are both true, but the public including investors continues to see the headlines of million-dollar payments from the Big Fours in fines and lawsuits. They don't really see the other side, auditing firms trying to tighten their procedures and quality control.

Let me suggest that the Big Four should pay a little more time publicizing what it is doing right in their audits. They don't have to give names but they can certainly report on instances where their actions directly protected investors' stake in public companies that they audited.  They can also report on their actions to ensure that their staff's independence isn't compromised. When was the last time you saw an accounting firm indicate it had taken disciplinary action against a CPA for failure to conduct an audit properly and in accordance with firm procedures?

A public relations image enhancement with words like 'trust" or the a statement agreeing to a multi-million dollar settlement or fine without admitting or denying the allegations doesn't quite cut it anymore.

The Big Four has a virtual monopoly on auditing of public companies; if they are not careful, they will lose it.  If they lose it, I don't believe it will be because executives of public companies hid fraud from auditors, but rather because the public didn't see the overwhelming value that is being provided by CPA firms as auditors.

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