Fraud fighters today face many of the same challenges as they did at the start of the last century, a leading investigator told accountants, academics and attorneys at the Fraud & Forensic Accounting Education Conference May 16 in Atlanta.

Jerry Decker, the deputy director of enforcement and investigations for the Public Company Accounting Oversight Board, recounted a 1930s scandal in which a twice-convicted felon assumed an alias, bought a large public company and continued his fraudulent ways for years before being caught. Even though the failures of the company’s auditors led to tougher regulations, many of the issues that were uncovered remain pertinent today: a lack of professional skepticism, failure to confirm inventory and accounts receivable, and making poor judgment calls.

A string of serious accounting scandals including WorldCom and Enron are among the developments that led to the creation of the PCAOB. So far, the board has publicly announced sanctions in 108 instances, against either individuals or firms. About one quarter of those instances involved large international firms. He said that the staff has expertise in a number of industry sectors, and always assigns a senior investigator to every case. But since law mandates that its hearings be closed, the facts are essentially hidden from public view.

“One of the critical issues for investor protection is the lack of transparency of PCAOB disciplinary proceedings under current law,” he said. “As it is, even after the board has decided to bring charges and even after findings have been made that an auditor engaged in serious misconduct, the public is kept in the dark as the matter is appealed.”

Since investigations remain confidential while appeals are underway, offenders are more likely to go to court rather than settle, he said. This means the agency spends a lot of its time and effort litigating, and the accountants continue auditing. Once findings eventually become public, so many years have passed that the offenders often brush it off as “old news.”

He noted that Senators Chuck Grassley, R-Iowa, and Jack Reed, D-R.I., have re-introduced a bill in Congress to make the process public (see Senators Re-introduce Bill to Make PCAOB Disciplinary Hearings Public).

“Investors, audit committees and others may not know that the auditor they rely upon has been found responsible for serious misconduct,” Decker said. “The law needs to be changed to make disciplinary proceedings transparent.”

Other conference speakers included influential journalists, bloggers, past and current investigators from agencies including the SEC, FBI and FDIC, as well as leading forensic accountants, university professors and members of the business community.

Georgia Southern University’s Center for Forensic Studies in Accounting and Business hosted the three-day event, which was sponsored by Porter Keadle Moore. The conference, now in its seventh year, was held in Buckhead, Atlanta’s financial center.

Terri Thornton owns Thornton Communications, an award-winning PR firm whose clients include conference sponsor Porter Keadle Moore.

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