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Treasury Department: Let's Audit The Auditors!

Oct 10

Written by: Jack Ciesielski
10/10/2007 6:00 AM

Along the lines of the Pozen Committee to examine complexity in accounting, the Treasury Department has announced the members of a committee whose aim is to "make recommendations to encourage a more sustainable auditing profession."

According to the press release, the committee "will examine auditing industry concentration, financial soundness, audit quality, employee recruitment and retention, in addition to other topics. Treasury expects the committee to produce findings and recommendations by early summer 2008."

Well, all institutions are worthy of critiquing from time to time - just to keep them fresh. It'll be interesting to see what this committee comes up with, because there's a lot that's going right with auditors nowadays. Encourage a more sustainable auditing profession? From the gripes one hears about audit fees, it seems like they're going to be able to sustain themselves financially, at least. Audit quality? That's a never-ending improvement process, for certain, but investor confidence hasn't been shaken lately by flawed audits. Employee recruitment and retention? That's a tough one: the accounting profession has had trouble with these twin goals for the last twenty years - it's hard for auditors and industry to retain real accounting talent when you compete with the sexiness of the finance world. (Especially after staffers have cut their teeth on public accounting.)

The committee will have its own website, if you care to monitor their activity. And they'll be "taking calls" from investors: you can register comments here for their October 15 meeting. They hope to have their work done and recommendations ready by the end of summer 2008.

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Unexplored Obligations: Other Postretirement Benefits

Defined benefit pension plans take center stage in the pantheon of investors’ fears when it comes to worrying about liquidity effects or earnings distortions. Yet they rarely consider the cash demands and earnings distortions resulting from other postretirement benefit plans.

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A recent edition of The Analyst’s Accounting Observer looks at the problematic reporting, with an eye focused on the "phantom income" results shown by 42 companies having negative OPEB costs. While the report is available only to paid subscribers, a condensed version is available for free upon request. To receive it, send an e-mail to Brenda Rappold at brappold@accountingobserver.com, with “OPEB Costs” in the subject line.

For information about subscribing to The Analyst’s Accounting Observer, click here.