New York (Sept. 16, 2004) -- One month after releasing the findings of its limited inspections of the Big Four, the Public Company Accounting Oversight Board warned that its more comprehensive 2004 check-ups will place a heavy emphasis on fraud detection and retention.
“We’re focusing on big-ticket items like fraud and adequate documentation,” explained George Diacont, director of inspections and registration for the oversight body. “We want to ensure that firms are complying with SAS 99.”
Diacont told attendees at a Sarbanes-Oxley conference here that while last year’s truncated examinations of the Big Four included about 16 engagements from each, this year’s more thorough inspections will look at an aggregate of roughly 500. This year the PCAOB will also inspect BDO Seidman, Crowe Chizek, Grant Thornton and RSM McGladrey.
“I heard a description of our [2003] findings as ‘cheerfully harsh,’” Diacont quipped. “But those were not done to set up a rating or an evaluation systems for the firms, but rather as an important first step to restoring credibility to the accounting profession.”
The board’s report of its 2003 inspections cited numerous instances of the Big Four firms' failure to comply with generally accepted accounting principles, particularly EITF-95-22, which led to the understatement of current liabilities and overstatement of working capital.
Diacont also emphasized the importance of firms’ cooperating with PCAOB inspections, warning that a lack of cooperation “is an easy way to run afoul of the PCAOB.”
Separately, the PCAOB announced this week that it got consent from the American Institute of CPAs to publish interim auditing, attestation, quality control, ethics and independence standards on the board’s Web site,
Those standards, which were developed and used before the board was established, were adopted by the PCAOB in April 2003 as interim standards for use in connection with audits of public companies. “By permitting us to display the interim standards developed by the profession on our Web site, the AICPA has made a valuable contribution to the public interest,” PCAOB Chairman William J. McDonough said.
The PCAOB also adopted amendments to its interim standards that conform the text of the interim standards to the requirements of PCAOB Auditing Standard No. 2, An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. The conforming amendments change and add to the interim standards certain text, including references, to assist auditors in performing integrated audits of financial statements and internal control. The conforming amendments also apply certain concepts developed in Auditing Standard No. 2 to circumstances in which an auditor is engaged solely to audit a company's financial statements.
-- Bill Carlino
