bestmediablog

As a breed, politicians never cease to amaze me. Short-sighted, self-serving and sometimes, just totally clueless.

A very good example is Senator Chuck Schumer's attempt to lean on the Big Four accounting firms about taking a less rigorous approach to mortgage accounting standards so that their clients can renegotiate bad loans.

Now, auditors are supposed to be independent gatekeepers and politicians should not be putting them under any pressure. We have all seen examples of what's happened when auditors forgot what their job was.

It's a point raised by Jack Ciesielski in The AAO Weblog.

"Maybe my memory is too long - but didn't we have a long period of self-flagellation over whether or not auditors were supposed to be independent of their clients, not very long ago? Here, we have a United States senator asking the audit profession to be a stimulus of the economy. What does the government want from the auditing profession - independent verification of financial reporting to instill investor confidence in markets? Or does it want them to shill for political policies because they happen to be situated at a convenient nexus in the financial reporting machinery? Let's hope its not the latter."

Bloomberg's Jonathan Weil is even more scathing.

"You see, management's job is to manage, and the auditor's job is to audit. There's also the decades-old requirement under U.S. securities laws that accounting firms must be independent of the companies they audit, both in appearance and in fact. Under the Securities and Exchange Commission's rules, that means the auditors, among other things, "must act in an unbiased and objective manner." Lobbying audit clients to change their business practices is the mark of a biased auditor, not a disinterested one. Auditors aren't supposed to act as cheerleaders for the economy. Their job is to ensure that companies tell the truth about how well or poorly they are performing, so that investors and the broader economy can operate efficiently.".