No More Mr. Nice Guy

A CFO survey suggests that recently passed rules for auditors may be a wise idea.

  • Yes 92%
  • No 8%

7. In what area? Please check all that apply. (Based on 154 respondents who bought consulting. Total exceeds 100% due to multiple responses.)

  • Tax 67%
  • Information technology 52%
  • Business combinations 36%
  • Other 21%

8. Have you bought these services from the same firm that performs your external audit?

  • Yes 54%
  • No 46%

9. Did you work for your current external audit firm prior to joining your company?

  • Yes 13%
  • No 87%

10. Have you hired staff from your current external audit firm during the past three years?

  • Yes 19%
  • No 81%

11. Have you ceased any of the following practices during the past six months: (a) hiring enternal auditor to perform internal audit? (b) purchasing consulting services from external auditor? (c) hiring staff from external auditor?

  • Yes 12%
  • No 88%

Which one(s)? (Total exceeds 100% due to multiple responses.)

  • (a) 30%
  • (b) 70%
  • (c) 35%

12. Do you plan to cease any of the practices referred to above during the next 12 months?

  • Yes 9%
  • No 91%

13. Do you think audit firms should be banned from providing consulting services to clients?

  • Yes 48%
  • No 52%

14. Do you think auditors should be barred from going to work for clients for a specified period?

  • Yes 35%
  • No 65%

15. Do you think companies should rotate audit firms on a regular basis?

  • Yes 48%
  • No 52%

International Turf Wars

The new corporate governance rules and auditor oversight prescriptions in the Sarbanes-Oxley Act will apply to all companies that file financial statements with the Securities and Exchange Commission as well as all firms that audit those statements. Not surprisingly, the rest of the world — with Europe leading the way — is not pleased with the extension of U.S. regulatory reach to any company that has shares listed on a U.S. exchange. “Forcing the U.S. solution on the rest of the world is not acceptable,” Mike Rake, the international chairman of KPMG, told the Financial Times. Adds Samuel DiPiazza Jr., global CEO of PricewaterhouseCoopers: “It could start a regulatory war, and audit firms might withdraw from servicing U.S. companies abroad.” Others have suggested that the regulatory reforms will make the U.S. markets a far less desirable place to raise capital.

Frederik Bolkestein, the EU commissioner in charge of financial regulation, says that the EU and its members are already taking steps to improve corporate-governance rules and to tighten market supervision. They do not need U.S. regulators to do the job for them, he adds.

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