image from blueblindssocialmedia.com " The accounting business has sometimes had an attitude of — how shall I put it? — contempt for those who would regulate it. The people who run the major firms know best, and regulators should yield to their superior judgment." ---Floyd Norris, in the article linked below Robert Kutsenda , while he was banned from practicing public accounting at Arthur Andersen for his involvement in Waste Management 's financial fraud (2001), was put in charge of "document retention." Not surprisingly, the newly developed document retention policies required the destruction of exactly the documents that were used to bring Mr. Kutsenda to justice. The "unintended consequences" of these actions led to the destruction of Arthur Andersen and the passage of the Sarbanes-Oxley bill, requiring an increase in government oversight. I find this fascinating. From 1978-1981, I worked for what was then a "Big Eight" accounting firm ( C&L ). At that point, consultants were not allowed to become partners, and the working papers of every audit were initialed and signed off on by a partner. Everyone had their own recognizable signature in both "initial form" ( TB ) and full signature ( Teri Bernstein ) and everyone was required to stand behind every piece of paper that they prepared, reviewed, or authorized. I guess that things changed in the intervening years. At any rate, it doesn't seem as though the accounting industry has actually learned anything from Arthur Andersen's humiliation and subsequent liquidation in 2001. Deloitte & Touche has just been fined for similar disregard for auditing standards. This story started in 2008. Deloitte was cited for not using properly "auditing the use of specialists" to properly analyze the fair value of assets (the primary issue in the mortgage debacle and subsequent recession). Regulators found Deloitte to have “ a firm culture that allows, or tolerates, audit approaches that do not consistently emphasize the need for an appropriate level of critical analysis and collection of objective evidence, and that rely largely on management representations .” Deloitte said " we strongly take exception " to the criticism, saying it did not like the " second guessing " of the regulators. By 2011, it was clear that Deloitte totally disregarded the criticism, and made none of the recommended changes to its auditing policies. Moreover, Deloitte used an auditor who had been banned from practice as an expert. Of course, he was never required to sign off on the items audited. The firm kept the experts anonymous behind the firm's name. Deloitte and Touche were recently fined $2 million because of violations relating to this episode. Interestingly, a study done in England found that “ requiring an individual audit partner to sign a report improves audit quality by increasing the partner’s accountability and transparency of audit reporting. ” Moreover, a study found also that investors also reward integrity: " Even more interesting is their finding that investors notice. Companies with more lenient auditors have to pay more to borrow money, and public companies with such auditors trade at lower valuations than do companies whose auditors have earned better reputations. " ---from a paper by W. Robert Knechel of the University of Florida, Ann Vanstraelen of Maastricht University, and Mikko Zerni of the University of Vaasa It doesn't seem to matter to American auditing firms, however. Nevertheless, the PCAOB (Public Company Accounting Oversight Board) is expected to issue a regulation in December to require that auditing partners identify themselves as responsible for audit opinions, even if they are not required to sign them. Source: " Accounting World, Still Resisting Sunlight " by Floyd Norris, New York Times, October 24, 2013. Follow up: Do you think that the partners of public accounting firms should take personal responsibility for signing off on the audits of publicly regulated companies? Why or why not? If you think that partners should not sign off, what would you suggest would be offered to the public instead as assurance that the audit of the company in question is legitimate, to the best of anyone's ability? If you are interested in this issue read the PCAOB take on it the auditing standards surrounding it.