Deloitte's deep regulatory influence
Is Deloitte the Goldman Sachs of the accounting industry?
Few audit firms have been as controversial recently as Deloitte. Just look at the tension over the recent PCAOB rebuke of the company's audit quality, which was deemed shoddy in several areas. One the surface, it might look like the PCAOB was tough on the Big Four audit firm. But you also have to realize the report took four years before it was made public, which generated controversy in and of itself.
Bloomberg raises a related issue, reporting that, "There was another important story, however, that the Public Company Accounting Oversight Board kept hidden: Three of its five board members had recused themselves from participating in meetings or discussions this year concerning Deloitte, because of past or current ties to the firm. The board members--Lewis Ferguson, Jay Hanson and the board's chairman, James Doty--were appointed by the Securities and Exchange Commission in January. Doty had been a partner at the law firm Baker Botts, where Deloitte is a client. Ferguson was a partner at the law firm Gibson Dunn & Crutcher LLP, which also represents Deloitte. Hanson, a former partner at the accounting firm McGladrey & Pullen LLP, has a daughter who works for Deloitte in its Phoenix office."
This is hardly an ideal situation--a majority of the board is not in position to act on one of the biggest firms it regulates. There may well be other conflicts that would reduce the involvement board members when it comes to other Big Four firms as well. You have to wonder whether the SEC took this into account when it nominated members. This is certainly an interesting revolving door in reverse problem that needs to be worked out. At a minimum, the PCAOB needs to reconsider its policy of not making recusals public. This is just too ironic for an entity that considers transparency a major goal.
- here's the commentary
PCAOB rebukes Deloitte on audit quality