A Close Encounter With the Power That Be

I was prepared for the worst based on the information that was related to me by friends. Long queue, being throughly scrutinised and even being denied entry. To my relief, none of that happened. Our flight was the first to arrive on that Saturday morning and I cleared immigration and custom within half and hour. I was then on the soil of the United States of America!

Given that my hotel room was not ready, I had around 5 hours to kill. This worked quite well as I had the time to explore Washington DC, one of the most powerful capitals of the world where many decisions were made that affected millions of lives elsewhere around the planet. The weather was very kind, the sun was shinning and it was right in the middle of cherry blossom, something which I did not appreciate until I saw the nice beautiful flowers around the Tidal Basin.

My first stop was the White House, the residence of the President of the United States of America. Incidentally on the plane, I watched the movie The Buttler, a recollection of experience of a black American who served a number of American Presidents even before blacks were treated equally in the United States. That certainly helped me to appreciate the 1600 Pennsylvania Avenue better. I picked up few souvenirs from the shop besides White House. That allowed me to take few photos as if I were the most person in the world.

The White House

Am I this powerful?

Next was the Smithsonian Complex where all the interesting museums are located. The Smithsonian's National Air and Space Museum was my choice as I have been interested in planes since I was a kid. It was a very interesting place to visit as we are able to see the development of aerospace industry since the Wright Brothers tried to fly for the first time.

The space capsule at the Smithsonian's National Air and Space Museum

The museum is not that far from Capitol Hill, the symbol of American democracy. While the building was certainly elegant, the politicians and lobbyists  who make this place their first home were not visible from afar. Nevertheless, buildings located around the park are not only historically significant but are still influencing the lives of people who may be living thousands of miles away. This is where power is concentrated!

The Capitol Hill

My visit was perfectly timed when the Cherry Blossom Festival was celebrated. The flowers around the Tidal Bay was certainly beautiful and the number of visitors who were there to experience the occasion was amazing. to a certain extend, it camouflage the atmosphere of power in Washington DC, very deceiving indeed.

In the next few days I met a number of individuals who had strong influence in DC and the rest of the world. One of the person who I met was Senator Sarbanes, the co-writer of the Sarbanes and Oxley Act which created the Public Companies Accounting Oversight Board, a structure which influences audit regulation until today.

I did not miss the opportunity to experience the american past time activity, enjoying a baseball game where the Washington Nations was playing. I could observe how sports and leisure intersected especially how much hotdogs and burgers were consumed during the game. Unfortunately we left the game venue at the seventh inning, when one of the players hit a grand slam at the very next!

Cheering the Nations

My stay was certainly a great opportunity to provide me with the insights of the American way of thinking, especially in a place where many major decisions were made and will continue to be made which affect us, a place well remote from Washington. There are also many universities and institutions in Washington, which reflect the amour of intellectual power as well. It is not a surprise to me that such existence may be necessary given the kind of community which Washington attracts.

In summary, my first encounter with the place where the power that be are operating was a very pleasant one.

IFIAR 2013 Global Survey on Inspection Findings

Washington, DC, April 10, 2014 – Audits of public companies around the world suffer from persistent deficiencies in critical audit areas, raising increasing concern among international audit regulators, the International Forum of Independent Audit Regulators (IFIAR) reported today.
“The high rate and severity of inspection deficiencies in critical aspects of the audit, and at some of the world’s largest and systemically important financial institutions, is a wake-up call to firms and regulators alike: More must be done to improve the reliability of audit work performed globally on behalf of investors,” said Lewis H. Ferguson, IFIAR Chair and Board member of the U.S. Public Company Accounting Oversight Board.

Report on Inspection Findings

IFIAR’s Report on 2013 Inspection Findings Survey summarizes key inspection results from audits of public companies, including systemically important financial institutions, submitted by 30 IFIAR members. These results came from inspection reports issued during the members’ most recent annual reporting periods that ended by July 2013.

• The leading areas of deficiency in inspected audits of listed public interest entities, or public companies, relate to auditing fair value measurements; internal control testing; and procedures to assess the adequacy of financial statement presentation and disclosures.
  
• The leading areas of deficiency in audits of systemically important financial institutions, including global systemically important banks, relate to auditing of allowance for loan losses and loan impairments; internal control testing; and auditing of the valuation of investments and securities.
  
• Audit firms' own quality control systems had the highest number of inspection findings in the areas of engagement performance; human resources; and independence and ethics requirements.
  

“The survey makes clear that these important inspection findings are prevalent across many nations and firms,” said Chair Ferguson. “IFIAR has an important role to play in monitoring and promoting audit quality across borders.”

Inspection findings are deficiencies in audit procedures that indicate that the audit firm did not obtain sufficient appropriate audit evidence to support its opinion. Most of these findings are consistent with the results of IFIAR’s inaugural survey issued last year, although the survey does not provide an adequate basis for year-to-year comparison of the quality of audit performance.

The findings discussed in the survey are primarily from inspections of audit firms affiliated with the six largest international audit firm networks, which are BDO International Limited, Deloitte Touche Tohmatsu Limited, Ernst & Young Global Limited, Grant Thornton International Limited, KPMG International Cooperative, and PricewaterhouseCoopers International Limited. In many cases, a regulator’s response to an inspection finding is to require the audit firm to perform additional procedures necessary to complete the audit satisfactory.

Root-Cause Analysis Needed

Measures undertaken by IFIAR to improve global audit quality include meetings with global network firm leaders to discuss inspection results and actions the firms will take to show demonstrable improvement in audit performance; and using the survey results in members’ home countries to inform their respective inspection and standard-setting activities.

In its meetings with global audit firm leaders, IFIAR expects the firms to provide information about the results of root-cause analyses, the performance measures used to assess progress, and whether measurable improvements are being made. The global network firms with which IFIAR meets have agreed to provide such information.

“The firms should develop robust root-cause analysis to gain a clearer understanding of the factors that underlie inspection findings and to take appropriate remedial actions,” said Janine van Diggelen, IFIAR Vice Chair, and Head of the Audit & Reporting Quality Division at the Netherlands Authority for the Financial Markets.

“Only with a thorough understanding of the underlying factors that have led to findings can audit firms take appropriate measures. These measures should be aimed at improving their auditing techniques, as well as their oversight policies and procedures, but also consider the cultural and behavioral influences in the firms that were relevant to the deficiencies. Both audit firms and regulators must do more to improve audit quality,” added Vice Chair van Diggelen.

In monitoring the firms’ progress in these areas, IFIAR hopes to gain insight into whether the firms are successful in addressing firm-wide issues and, accordingly, promoting consistency in the execution of their audits.

A fact sheet on the 2013 survey also is available.

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About IFIAR
IFIAR is comprised of 50 independent audit regulators from jurisdictions in Africa, the Americas, Asia, Europe, the Middle East and Oceania. It was formed in 2006 to provide a forum for regulators to share knowledge of the audit market environment and the practical experience gained from their independent audit regulatory activity.
IFIAR publishes the results of its surveys to inform regulators, investors, the financial community, and the public about the current state of inspections of audits of public companies, including financial institutions, around the world. For further information about IFIAR and its activities, visit ifiar.org.