Certain audit firms earn millions of dollars each year from their publicly traded companies for conducing their yearly audits and reporting no material issues. Some have suggested that the repeat income has affected the ability of the audit companies to be independent and report findings that suggest problems with internal controls or other major issues that would be important for investors and others to know about. The Public accounting Oversight Board (PCAOB), which regulates the auditors of U.S. listed public companies have approved a new rule which would change a process called confirmation.
Presently, audit firms are required to request that a third party, such as the client’s lender or customers to confirm the accuracy of certain information, such as the amounts of accounts receivable. Audit firms are presently allowed to assume that the lack of response is enough to corroborate the accuracy of the information. No longer. Under the new rule, audit firms now have to received confirmation that the stated amounts of cash and cash equivalents held by third parties primarily lenders, are accurate. The communication may be made electronically. PCAOB Chair Erica Williams has said that the new rule will help auditors detect fraud and better protect investors into the future. The interesting question is this: will it? There have been several cases in which whistleblower have filed cases under the SEC whistleblower program in which insiders at audit companies have revealed the audit company frauds where they hide information learned about their client’s fraud. See the NYT article on KPMG settlement for $22 Million https://www.nytimes.com/2005/04/20/business/kpmg-settles-with-sec-on-xerox-audits.html
JEFFREY NEWMAN IS A WHISTLEBLOWER LAWYER WHOSE FIRM HANDLES CASES BEFORE THE SEC WHISTLEBLOWER PROGRAM AS WELL AS HEALTHCARE FRAUD UNDER THE FALSE CLAIMS ACT. THE FIRM SITE IS WWW.JEFFNEWMANLAW AND JEFF’S EMAIL ADDRESS IS JEFF@JEFFNEWMANLAW.COM AND THE PHONE IS 617-823-3217
