Concerns over PCAOB rules

The main concern that Commissioner Glassman refers to is that Auditors appear to be being given more and more responsibility and a more central role in companies' control network. The new legislation, rules and procedures issued all go down this road.

This appeared to be the case, mainly because of a lack of understanding of their actual role, when failings happened (Enron, MCI, Parmalat, etc.). While it is possible, I will not say likely, that the auditors in these cases were not, as a minimum, thorough in doing their jobs, in some cases, the auditors seemed to have taken the brunt of the blame.

This is dangerous. Auditors have never been policemen in the forensic sense, unless engaged for that purpose. Management were always supposed to be responsible for the activities of their companies and for the statements made and produced.

We should not put into place rules or make statements that water down the full responsibility of management for their companies. Auditors can make the appropriate tests and ask the appropriate questions but management are the ones that should know their companies and should be getting on with it.

If things are not being done right, we need to get management ethics right! Just blaming the auditors does not solve the problem.

OAM

See Financial Times article:
By Andrew Parker in New York
Published: February 18 2005 02:00 Last updated: February 18 2005 02:00

An initiative to improve financial reporting by companies appears to have wrongly become focused on work by auditors, a member of the Securities and Exchange Commission has claimed.
Cynthia Glassman, one of the five commissioners at the SEC, expressed concern at the impact of rules written by the Public Company Accounting Oversight Board, the accounting regulator created after the Enron and WorldCom scandals.

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Related links:
Cynthia A. Glassman Biography