|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
The Man Who Put Auditing First
Staff Writer – Financial Times
Securities Mosaic. December 1, 2005
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EXCERPT: One of the founding fathers of the US accounting regulator left the watchdog yesterday. William McDonough had been chairman of the Public Company Accounting Oversight Board for almost two-and-a-half years. The PCAOB was created by the 2002 Sarbanes-Oxley law on accounting and corporate governance, as part of efforts by lawmakers to restore investors' confidence in companies' financial statements. Mr McDonough played a significant part in enabling the accounting profession to begin to regain public trust after a raft of corporate scandals highlighted how auditors failed to blow the whistle on financial reporting frauds such as Enron, WorldCom and HealthSouth. He and his staff ensured the big accounting firms once more made auditing their number one priority. During the 1990s, the big firms transformed themselves into multidisciplinary organisations that switched focus from auditing to lucrative consulting work. Lawmakers concluded in the Sarbanes-Oxley law that the only way to restore the integrity of auditing was to abolish the profession's system of peer review and impose, in the form of the PCAOB, an independent watchdog. Mr McDonough, a former president of the New York Federal Reserve Bank, leaves the PCAOB running at almost full capacity. When he arrived in June 2003, he was employee number 42. Today, it has a staff of more than 400. He cites two main achievements. First, putting together the PCAOB's "superb staff". Second, the establishment of a "supervisory model" for the accounting firms, in which "we work with the profession". Rather than simply wave a big stick at the firms, Mr McDonough urged them to work with the regulator to raise the quality of auditing. And in all of his exhortations he struck a strongly moral and religious tone. Taught at school by Jesuit priests, Mr McDonough urged accountants to "restore their reputations and save their souls". The firms' leaders responded positively, and he believes their stance has enabled the profession to make faster pro-gress with efforts to regain public confidence. |
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