For ages, the profession has devoted time to discussing and trying to address the existence of a huge gap between the views of the public about auditors' responsibility for finding fraud (when a fraud is uncovered, they say the auditors should have found it) and what auditors view as their responsibility for finding fraud (most have long held that it's not their responsibility and that they aren't properly trained to detect fraud).
It may no longer matter. It seems that the head of the Public Company Accounting Oversight Board -- a man who could arguably give audit firms some very big headaches -- is siding with the public on this one, so it may not matter what audit firms think about the issue.
If it wasn't already abundantly clear that PCAOB Chairman William McDonough wants auditors held accountable for finding fraud, in an interview in this month's issue of CFO magazine, he spells it out loud and clear.
When asked by his interviewer how he responds to auditors' insistence that it isn't their job to detect fraud, McDonough, who has described his oversight role as "tough love" on auditing, doesn't mince any words. "We have a very clear view that it is their job. If we see fraud that wasn't detected and should have been, we will be very big on the tough and not so [big] on the love," he told CFO.
Still unsure where he stands? McDonough expands this sentiment when asked if there is a "silver bullet" for preventing fraud. He told the magazine, "To have auditors understand that, with relatively few exceptions, they should find it. To me, the relatively few exceptions are those cases where you would have some extremely dedicated, capable crooks. In most cases, though, the crooks are either not that smart or they don't cover their tracks that well."
Audit firms might want to take heed, since those words are coming from the head of the agency charged with auditing the auditors, and which also wields the power -- and isn't afraid to use it -- to set audit standards.
