Called to Account by Paul M. Clikeman

Author:Paul M. Clikeman
Language: eng
Format: epub
ISBN: 9781136224898
Publisher: Routledge

The Revolving Door

Only a small minority of young auditors remain in public accounting longer than five years. Audit clients routinely raid their accounting firms' staffs seeking experienced accountants who already understand the clients' operations. And accounting firms often encourage departing auditors to join a client, believing the relationship between the accounting firm and the client will be strengthened.

The “revolving door” between accounting firms and their clients poses a number of threats to auditor independence. Job-seeking auditors may spend more time trying to impress potential employers than critically examining the fairness of the financial statements. At best, the auditor might find it difficult to objectively evaluate the integrity of client personnel. At worst, a client might use a lucrative job offer to reward an auditor for a favorable report.

Potential problems continue after an auditor joins a client. The former auditor's knowledge of the audit firm's testing techniques might enable the client to manipulate the financial statements in ways that are least likely to be detected. And continuing auditors might relax their skepticism when questioning a friend and former colleague.

Jack D. Atchison, the Arthur Young partner who supervised Lincoln Savings & Loan's audits, became the poster boy for the revolving door. Atchison earned $225,000 per year at Arthur Young before accepting a $930,000 position with Lincoln's parent company. Congressman Richard H. Lehman (D, California) questioned Arthur Young chairman William Gladstone about Atchison's role reversal.8

CONGRESSSMAN LEHMAN: Did anyone at Arthur Young have any contact with Mr. Atchison after he left and went to work for Lincoln?

MR. GLADSTONE: Yes, sir.

LEHMAN: In the course of the audit?

GLADSTONE: Yes.

LEHMAN: So he went from one side of the table to the other for $700,000 more?

GLADSTONE: That is what happened.

LEHMAN: Did the job he had there have anything to do with interfacing with the auditors? Gladstone: To some extent, yes.

LEHMAN: What does “to some extent” mean? GLADSTONE: On major accounting issues that were discussed in the Form 8-K, we did have conversations with Jack Atchison.

LEHMAN: So he was the person Mr. Keating had to interface with you in major [accounting] decisions?

GLADSTONE: Him, and other officers of American Continental.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.