The accounting firm agreed to a $950,000 penalty and to engage an independent consultant to evaluate its current quality controls.
While it may serve the interests of struggling companies, shopping for a favorable audit opinion lessens auditor independence and audit quality.
Keeping the auditor-client relationship free of conflicts of interest is still a struggle.
The longer the tenure of a company's Big Four auditor, the greater the fee — even though the effort required of the auditor lessens over time.
Requiring top corporate executives to be only a year or two removed from a prior job with the company's auditor is insufficient, study suggests.
Auditors who trust their clients can feel freer to be more skeptical of their financial reporting.
The SEC says EY didn't do enough to prevent two former auditors from getting "too close" to finance executives at companies they were inspecting.
"Form AP" would name the engagement partner but would not be included in the client company's SEC filings.
A Billy Joel favorite sparks thoughts of auditor independence.
A partner at L.L. Bradford failed to monitor partner assignments, leading to auditor rotation violations in six public company audits, says the PCAOB.
“To ensure the integrity of our financial reporting system, firms cannot play the roles of auditor and preparer at the same time,” said an SEC official.
Auditor independence violations can spawn significant costs, distract management and limit a company’s access to the capital markets
