(WASHINGTON)—In a new investigation, the Project On Government Oversight (POGO) details the concerning extent to which the revolving door spins between the Big Four accounting firms and the financial regulator that oversees the auditing industry.
POGO’s reports highlights several case studies that illustrate that revolving door between the nation’s biggest auditors and the Public Company Accounting Oversight Board (PCAOB), including KPMG’s cheating scandal. In that case, KPMG hired staffers from the PCAOB as part of an effort to obtain advance information on which audits the oversight board would inspect—a scheme that resulted in several convictions and a $50 million fine against the accounting firm.
The POGO study found that a large percentage of employees at the PCAOB previously worked at one of the Big Four accounting firms. Based on a review of LinkedIn profiles in November 2019, it appeared that at least 40% of employees at the PCAOB at that time previously worked at one of the Big Four firms—Deloitte & Touche, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and KPMG.
The cozy relationship between the Big Four firms and the board tasked with holding them accountable could help explain the PCAOB’s failure to penalize the accounting firms for botched audits. A previous POGO investigation found that while the PCAOB listed 808 instances of defective audits by the U.S. branches of the Big Four in its inspection reports over the course of 16 years, the oversight board has brought only 18 enforcement actions against the U.S. Big Four or employees of those firms. Another POGO investigation found that the PCAOB has become increasingly secretive, omitting from enforcement orders the names of companies that allegedly received faulty audits.
“The pervasive revolving door between the country’s top accounting firms and their regulator shows that we should not have any confidence that the oversight board is fulfilling its mission,” said Danielle Brian, executive director at the Project On Government Oversight. “In order for the PCAOB to conduct effective oversight of these firms’ auditing practices, the board must have greater independence from the industry.”
Media Contacts: Caitlin MacNeal, Media Relations Manager at the Project On Government Oversight (POGO), [email protected] or (202) 347-1122; or Tim Farnsworth, Chief Communications Strategist at POGO, [email protected] or (202) 347-1122.
Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that investigates and exposes waste, corruption, abuse of power, and when the government fails to serve the public or silences those who report wrongdoing.
We champion reforms to achieve a more effective, ethical, and accountable federal government that safeguards constitutional principles.