Ernst & Young sets up an Independent Audit Quality Committee

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Ernst & Young’s U.S. firm has established an Independent Audit Quality Committee to improve audits at the Big Four firm, getting advice from a trio of luminaries from the Public Company Accounting Oversight Board, the Financial Accounting Foundation and Vanguard.

The new committee includes former PCAOB member Jeanette M. Franzel, FAF chairman Charles H. Noski and former Vanguard chairman and CEO F. William McNabb III, who will chair the committee, known as the IAQC for short. They are expected to advise senior leadership at EY US on the aspects of the firm’s business, operations, culture, talent strategy, governance and risk management that affect audit quality. The move comes as Big Four firms are coming under pressure to improve audit quality after several high-profile accounting scandals in the United Kingdom, the European Union and South Africa.

“At EY, we believe in the power of diverse points of view in all aspects of our business,” said EY US chairman and managing partner and Americas managing partner Kelly Grier in a statement. “This includes harnessing the value of independent perspectives to further strengthen audit quality. We believe that gaining insight and advice from the IAQC will help us fulfill our important role of delivering high-quality audits that build confidence in the U.S. and global capital markets. Leaders of the SEC have also observed the benefits of independent and diverse thinking brought by outside leaders to support audit quality and the public interest.”

Franzel served as a PCAOB member from 2012 until last January and, prior to that, she had several senior roles at the Government Accountability Office. She is a CPA, a CMA, a certified internal auditor, and a certified government financial manager and has received many industry and government awards.

“My entire career has been built on furthering audit integrity and driven by the knowledge that it is critical to market confidence and the public interest,” Franzel said in a statement Wednesday. “I respect the work that EY is doing in this area and am honored to advise them alongside my colleagues on the committee.”

McNabb is the former chairman of the board of directors and board of trustees of the financial services firm Vanguard Group Inc. He joined Vanguard in 1986, served as CEO from 2008 to 2017, and was named chairman in 2010. Previously, he led each of Vanguard’s client-facing business divisions. He currently serves on the board of UnitedHealth Group.

“Having served at the helm of an organization directly accountable to investors, confidence in the public audit is an area of great passion for me,” McNabb stated. “I look forward to working with EY and my fellow committee members towards the goal of audit transparency, trust and confidence.”

Noski is chairman of the board of trustees of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board, the Governmental Accounting Standards Board and the Private Company Council. He currently serves as a member of the boards of directors of Booking Holdings Inc. and Microsoft Corp. He’s also a retired vice chairman of Bank of America Corp. and served as the bank's executive vice president and CFO. Earlier in his career, he was a partner at Deloitte.

“Our globally interconnected economy brings new complexity to the audit, and my experience in a variety of roles positions me well to advise on related matters,” said Noski. “I look forward to working with Jeanette and Bill as EY continues to enhance the high-quality work on which our capital markets and other stakeholders rely.”

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Audits Audit standards Jeanette Franzel EY