With time and experience, auditors have gained a better understanding of the PCAOB’s expectations. “What you saw initially was a disconnect,” says Mike Burke, a former KPMG partner who is now CFO at Aecom Technology, a provider of technical- and management-support services. “The auditors focused on the minutiae and companies focused on the biggest risk areas. Now we have a greater alignment between the way auditors and companies look at the business.”
The Way Ahead
Clearly, both companies and auditors have come a long way since the early days of Sarbox implementation, when no one knew quite what regulators expected or what was required for a “passing” grade on Section 404. “There was a lot of running around, chasing our tails, and learning from month to month,” recalls McDonald. Adds CDW’s Klein, “Both companies and auditors probably did more work than was required because we didn’t know exactly what was required.”
The lessons learned by auditors and finance staffers as they institutionalize the many changes mandated by Sarbox have proved as important as the additional guidance from regulators in improving the process. While the CFO-auditor relationship may not be as warm as before, it’s still evolving. One good sign: finance executives don’t seem quite as angry as they were a few years ago.
Of course, there will continue to be struggles over fees and the amount of advice or information auditors are willing to share, as well as how long it takes to get that information. But many CFOs see things moving in the right direction. “We are moving much closer to a collaborative relationship,” says Mason. “Collaboration does not mean that the company doesn’t have the primary responsibility for making the accounting decisions and judgments. It just means that the auditor can add value.”
Kate O’Sullivan is a senior writer at CFO.
To see what CFOs in our survey had to say about auditors, click here.