IA Goes to Meetin'

On 7 May 2009 I attended the Houston CPA Chapter's "Financial Reporting Symposium". Here's the "dramatis personea" then some excerpts from my notes.

Jane Adams (JA)--a financial consultant who once worked for the SEC.
Bret Dooley (BD)--Citigroup Accounting Policy Head, Markets & Banking Segment.
James Kroker (JK)--Acting Chief Accountant of the SEC, formerly a D&T partner.
James Leisenring (JL)--IASB member, formerly FASB member.
Mark McCollum (MM)--CFO Halliburton.
Charles Niemeier (CN)--PCAOB member, formerly with the SEC.
Marc Siegel (MS)--FASB member.
Phil Wedemeyer (PW)--Grant Thornton partner.
Katherine Schipper (KS)--Duke University accounting professor, formerly FASB member, Chicago PhD student in the early 1970s, my classmate in three clases, panel moderator.

The symposium had no formal presentations. KS took audience questions and read them to panel members for responses. KS did not read my question. That did not surprise me.

CN said something about the PCAOB's continuing its inspection program. My comment: so? Someone asked, "Are PCAOB CPAs competent"? CN fumfered that one. Someone else noted most PCAOB CPAs were "former" Big 87654 partners. CN has no problem with that, since only those with large client audit experience could inspect the Big 87654's work. Hey, CN, I've got some oceanfront property in Arizona to sell you. Many CPAs, IA included believe, based on "inspection" results that PCAOB CPAs are incompetent or Big 87654 stooges. CN explained Sarbox was passed to prevent fraud. I ask, has Sarbox improved bank accounting? When asked about bank accounting, CN's response was such that I concluded, "he doesn't know what he is talking about, doesn't understand internal controls". Some CPAs do what I call "disclosure" audits, i.e., they never dig into "non-accounting" data to ascertain the correctness of a client's accounting records. For instance, looking at industrial engineering reports which might underlie a manufacturing company's inventory costs. The Big 87654 is full of CPAs who do not understand cost accounting. CN reminded us the "PCAOB can't reveal its findings". I ask why not. Who or what is the PCAOB protecting? PW stunned me by asking CN "What is the purpose of the PCAOB". PW added six CPA firms audit 99.2% of all SEC registrants by market cap. Why does the PCAOB look at the rest of them. Francine McKenna at re: The Auditors and I have echoed similar sentiments. PW asked this despite Grant Thornton's being the fifth largest US CPA firm. JL asked, "where were the regulators" with respect to our current financial crisis. KS directed JL's remark to CN who fumfered an answer. Someone asked if CPAs should have found problems with the banks' capital levels. I wrote, CN "is a government tool". JL noted the FASB's recent SFAS 157 capitulation to Congress, then said it is "propaganda instead of useful information". Right one JL! JL was a breath of fresh air during the symposium. Can we clone JL? CN said, "we don't engage in disputes over GAAP". I ask, what do you do? CN said there are 1,800 PCAOB registered firms. I say, why look at say 1,780 of them? CN said of the new risk assessment standard, "it was so dense, it was hard for me to get through". Much of what the PCAOB generates is garbage. Just like the AICPA and its Assessing and Responding to Audit Risk in a Fianancial Statement Audit, a 498-page tome, my 30 November 2008 post: http://skepticaltexascpa.blogspot.com/2008/11/more-good-news.html. JA favored one set of global standards. I ask why? JL noted the FASB's independence is threatened. I agree. JL said the FASB is "not stabilizing the banking industry". I agree. Was it supposed to? Where's the Fed, OCC, etc? MM commented about Halliburton's cost of maintaining multiple sets of books. I say so? Someone noted "principles are difficult to audit". This is one reason I oppose IFRS, it will produce more unauditable results. That may be why some favor it, like the SEC. It will let SEC staffers "pass" any registrant they want to. I'd rather give the SEC less discretion. I don't trust it. JL noted the Fed has the "right to print money" and asked at what amount should that be capitalized? Henry Kaufman asked this in about 1980. A discussion of oil and gas accounting and SFAS 71 took place. KS said something to the effect it was amazing SFAS 140 still exists. JL said of QSPEs, they "are a silly idea in the first place". Amen. BD defended QSPEs, I wrote BD's "a double talker". A discussion of puts and guarantees followed. JK was asked if further Sox 404(b) deferrals might occur for small companies. He gave no clear answer. JA wants the auditor's report revised to list corporate risks. I think she wants auditor assurance on an SEC registrant's risk comments in its filings. A discussion of SFAS 5 followed. MM didn't want "prejudicial information" released. Potential changes in SFAS were discussed and cash balance plan accounting. Now SFAS 157 came up again and someone attacked "internally developed inputs" for valuing bank assets. JL said they amount to to banks saying, "we don't like that price". JL challenged bank managements to buy the supposedly undervalued assets personally. BD flinched at this. I made JL's suggestion on 17 July 2008. JA said the FASB "abdicated its responsibility" in caving in to Congress on SFAS 157. Amen.

I had some surprises at the symposium. JL was a breath of fresh air. Obama likes "czars". JL for accounting czar. JA, once with the SEC Chief Accountant's Office disappointed. She seemed preoccupied with trivia and searching for a "magic number" that would facilitate her financial analysis. BD is a Citigroup middle manager and apparently said whatever "C" told him to. If you weren't skeptical of "C's" financials before, you should be after hearing BD. JK disappointed; I concluded this former D&T partner is hopelessly incompetent. MM seemed a typical Fortune 500 CFO, he wants to minimize his firm's accounting costs and present whatever it does in the most favorable light. CN was a complete blowout in my book. This current PCAOB member, and former SEC employee struck me as not having my professional skills when I had 30 months CPA experience. Really. Close the PCAOB. Now! MS struck me as another bureaucrat who won't rock the boat. PW was a pleasant surprise. A straight talking no-nonsense guy. The kind of guy to "tip a brew" with now and again. Even his PCAOB stint apparently didn't hurt him. It may have made him hostile to it. KS was her 1973 self. When a UC PhD student, I thought KS was the smartest female in the school. Aside from having grey hair she hasn't changed a bit, analytical, caustic, but unwilling to throw molotov cocktails when I believe warranted. All in all, worth the day.