An Example of Hubris, Incompetence, and Greed I always tell my students that the best way to learn about ethics, or the lack thereof, is through a case study. What follows is a mini-case study of the FTX fraud. Last week Sam Bankman-Fried was found guilty of misappropriating and embezzling billions of dollars of his […]
The Story of FTX and Sam Bankman-Fried Read More »
Independence Standards at Risk Perhaps you are aware that private equity firms have started to acquire a controlling interest in accounting firms, which these days are better referred to as “professional services” firms. The first such acquisition was in August 2022, when Tower Capital Partners purchased the stock of Eisner Amper LLP, a majority-owned CPA
Does Private Equity Ownership of CPA Firms Violate Audit Independence Read More »
How can it be that three of the big four CPA firms were caught cheating on external and internal ethics and continuing professional education (CPE) courses, given that their role as auditors is to protect the public interest and the capital markets that rely on audited financial statements? My blog today explains what happened and
Audit Firm Professionals Have Cheated on Ethics and Internal Training Exams Read More »
Objectivity and Impartiality Replace the Strict Application of Independence Rules In June 2021, the Securities and Exchange Commission (SEC) made amendments effective for certain rules regarding auditor independence requirements (known as Rule 2-01 of Regulation S-X). The intention behind these amendments is to modernize the SEC’s rules governing auditor independence and more effectively focus the
Do “Modernized” Independence Rule Changes Protect Investor Interests? Read More »
Examining the POGO Report and Other Matters It’s been twenty years since the Public Company Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act of 2002 (SOX). This is a good time to evaluate the mandate given to the board, its work during that period, and whether it protects the public interest. One way to
Is the PCAOB Protecting the Public Interest? Read More »
Looking for the Red Flags of Fraudulent Financial Reporting I recently read an article that describes the results of a study that contends that some company bosses are being placed in a position of power when the company needs “aggressive earnings reports”. In such cases, recruiters are more likely to suggest job candidates with “dark
Do Dark Triad Personalities Explain Aggressive Accounting? Read More »
Personality Traits Might Give Us a Clue I recently read an article that describes the results of a study that contends that some company bosses are being placed in a position of power when the company needs “aggressive earnings reports”. In such cases, recruiters are more likely to suggest job candidates with “dark personality traits”
Looking for the Red Flags of Fraudulent Financial Reporting Read More »
What is the Public Interest? It’s been about 18 years since Congress created the Public Company Accounting Oversight Board in response to widespread fraud in the financial statements of the likes of Enron and WorldCom. Given the high rate of audit deficiencies identified in PCAOB inspections of public company audits, the time is right to
Is it Time to Reconfigure the PCAOB? Read More »
A Critical Analysis of the Business Roundtable Statement on the Purpose of a Corporation On August 19, 2019, the Business Roundtable issued a Statement of the Purpose of a Corporation that really is a mission statement, not a plan of action. As such, it is short on details about how corporations can achieve their purpose
Social Responsibilities of Corporations and the Public Good Read More »
The Case of GE and KPMG A new rule adopted by the U.S. Securities and Exchange Commission requires disclosure of the tenure of a public company’s external auditor in the annual report. KPMG recently reported that it has audited GE since 1909. This raises the question of whether there should be mandatory audit firm rotation
Should Auditors Rotate Every 109 Years? Read More »