Attestation Update – A&A for CPAs

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Insider trading update 4-24-13 – We should be done with the story by now

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The story on a KPMG partner trading on inside information is over.

That is the conclusion from comments by Mr. Michael Andrew, chairman of KPMG International.  Mr. Andrew made several noteworthy comments during interviews in China.

The Financial Times reports KPMG chief dismisses ‘one-day wonder’ scandal:

The chairman of KPMG has dismissed as a “one-day wonder” the insider trading scandal involving the former head of the firm’s Los Angeles audit practice.

The reason the story got so much play is there wasn’t a whole lot going on the week a regional PIC of a Big 4 firm was indicted on a felony conspiracy charge and sued for insider trading:

He told the Financial Times that the story grabbed headlines “because it was a slow news week”.

Presumably that means the Wall Street Journal editors were bored and just didn’t know what to talk about the day they used half the space above the fold on the front page to show a picture of the partner accepting a payoff. For insider trading. In public. With $5,000 provided by the FBI. A second time.

I’m not that familiar with PCAOB rules, but have a working knowledge of AICPA rules. I was surprised to learn that disclosure of the lead partner’s name is prohibited in the U.S.:

Mr Andrew said KPMG is prevented by confidentiality requirements from revealing what other companies’ audits were led by Mr London.

I asked on Twitter if disclosure was really prohibited and got this response from Big4Veteran:

Unless you go to the annual stockholders’ meeting where you can talk to him and get his business card.

Reuters also has a report from Shanghai: KPMG chairman says campaign against auditor anonymity misleading.

In responding to the PCAOB’s idea of requiring disclosure of the lead audit partner, Mr. Andrew said…

…the proposal would do little to fix real problems such as determining what types of financial data need to be audited as well as boosting the flow of information between regulators and government agencies.

“I don’t think it’s important. I think it’s quite misleading. There are much more fundamental things that need to be done to restore confidence in investors than just having the individual partner designated on the account sign his name,” KPMG’s global chairman told Reuters.

I don’t think disclosing the name of the lead partner will do any good in terms of improving objectivity and independence. Don’t think it would do much harm either. But I can’t see how doing so would be misleading.

Of course Going Concern weights in on the slow-news-day comment. Their post KPMG Global Chairman Doesn’t Consider a Partner at His Firm Passing Material Non-public Information About Audit Clients to a Golf Buddy to Be All That Newsworthy starts with:

I mean, really.

The Business blog at Financial Times is a bit more restrained than Going Concern (imagine that!): Too soon for KPMG to come out fighting:

There may come a time when Mr Andrew should come out fighting, but it is not yet. …

Mr Andrew should continue to reassure his customers and partners and if he can’t keep a lower profile, he should at least adopt a less dismissive tone.

Written by Jim Ulvog

April 24, 2013, 8:20 am at 8:20 am

Posted in Audits

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