I awoke last night
in the cold sweat of nightmare terror – my own version of Bill Murray in the
1993 film, “Groundhog Day”– that CNN moderator Candy Crowley saw her shadow, and
we were cursed with six more weeks of Presidential debates.

And PCAOB chairman
Jim Doty kept scheduling “public meetings” on the exhausted topic of mandatory
auditor rotation – the last in Houston having dragged through October 18 with no observable contribution to our wisdom – until he held
one in the junior high school gym in Punxsutawney itself.

A tour of media,
commentators, and those knowledgeable, confirms the prevailing sense of lassitude
and ennui – owing much to the
nationwide American paralysis ahead of its November 6 elections, but also to
the absence of any credible display of energy, much less urgency, around the
issues overhanging the accounting profession.

The usual crabbing
continues, of course – ranging from the ineffective if age-old grousing about
auditor skepticism — vented by the PCAOB chair himself, webinars from the private sector, and such bloggers as the Grumpy Old Accountants – to the commenter on my last posting, about the British regulator’s new policy
on re-tendering, stating mistakenly that I “ask
for ‘proof’ that lack of auditor rotation is a cause of fraud,” when I want
no such impossible thing, but only recognition, as I have often said (see here) of the absence of “any
evidence of a link between auditor tenure and audit quality.”

In the gathering gloom
and darkness of late autumn, then:

Nothing good can be
expected from the Securities and Exchange Commission in Washington, where
Chairman Mary Schapiro is said to be packing for her post-election departure, having in her light-touch
tenure realized nothing of effect on the structure or stability of the
assurance function. 

On the
globalization of accounting standards, the dialog is if anything more sterile
than ever: The SEC has only an interim chief accountant in place; the griping about
non-convergence includes the hand-wringing of IASB trustee chairman Michel Prada and the sideline irrelevancies of AICPA
president Barry Melancon; while FASB chair Leslie Seidman should be
plainly tired of the censorious Dutch-uncle utterances of her counterpart at
the IASB, chairman and non-accountant Hans Hoogervorst.  

While on the
auditing standards side, the intellectual heft brought by the International
Auditing and Assurance Standards Board to its project on Improving the Auditor’s Report is unmatched by the political skills or
horse-power necessary for action in the face of entrenched resistance. At the
same time, the PCAOB’s parallel Concept Release, going back to June 2011 – which by rights
should be cooperative and complementary – wallows becalmed for lack of any
readiness to re-engineer a reporting system in which all interested parties are
invested in preserving the status quo.

Even what should be
a bright spot – the launch earlier this month by seven joint sponsors of an
assessment tool for audit committees, “Annual Evaluation of the External Auditor” – designed to support “an informed
recommendation to the respective board of directors whether to retain the
auditor,” has the taste of very thin gruel.

That is, it says
precious little about the skill level of an audit committee, to think it
requires such an anodyne checklist as these “get-to-‘yes’” examples: 

• “Was
  the cost of the audit reasonable and sufficient for the size, complexity and
  risks of the company?”

• “Was
  the audit engagement partner able to explain accounting and auditing issues in
  an understandable manner?”

Enough with the
softball treatment. For a committee obliged to justify itself, why are there
not such substantial questions as:

• “What
  qualifications and training does the audit committee itself have in the
  exercise of skepticism and the avoidance of bias?"

• “If
  forced to rotate or re-tender the audit, does the company have a realistic
  alternative choice?” 

• “What
  other or different forms of assurance, beyond the current standard audit
  report, would company management and its community of information users find
  useful and valuable?”

Historians of the
evolution of knowledge teach that systems on the cusp of obsolescence –
inherently resistant to the disruptions of fundamental change – evolve only
when those contributing to the prevailing inertia are forced into
confrontation. 

But that when they
are, the realignments are highly disruptive, in ways unpredictable in advance.

Meaning that the
groundhog’s looming shadow is long, dark and ominous.

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