Re:Balance -- Jim Peterson

Federal Charters for Accounting Firms -- A Blank Page Approach

Six years on from the disintegration of the Arthur Andersen firm, the fragility of the last Big Four and their franchise to provide large-company audits attracts a discussion that is steadily louder – but not more productive.

The latest example of a collection of the wise, talking past each other, was the June 3 meeting of the US Treasury’s Advisory Committee on the Audit Profession, summarized on Edith Orenstein’ blog – here – and webcast here.

A reason the discourse is so barren is the circularity of the blame-mongering. Rather than recognize the interlocking web of entanglements, the focus is on the problems of “the other guys.” The list includes:

•    Issuers’ incentives to manipulate their results
•    Overly complex accounting standards
•    Persistently inadequate audit performance by a too-small oligopoly
•    Regulators with over-lapping but parochial interests
•    Liability standards that lack precision in practice or predictability in outcomes, and
•    The overhang of catastrophe-level litigation that would overwhelm the audit firms’ fragile capital structures.

If there is ever to be a comprehensive, holistic solution, a blank-page approach is essential. There is such a framework at hand – although it would require a clean, robust and full-blown debate and a fresh legislative mandate. What is lacking, but essential in the organizational and legislative discussion, is the broad buy-in and ready participation that might actually replace today’s antagonistic finger-pointing.

Namely, national-level “charters” or “public company audit licenses” – the naming is less important than the concept – could authorize and regulate newly organized and re-structured firms -- that would do the audits of all public companies.

Applied in the United States – a jurisdiction necessary for any worldwide solution -- a new system would be administered by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, having as analogies the government oversight of American stock exchanges, credit rating agencies and broker-dealers.

Newly organized “public company audit licensees” could be in corporate form. They could be owned by existing accounting networks or other new market entrants. Their resources – personnel, methodologies and technology – could be internal, or out-sourced from the existing Big Four or from emergent niche competitors.

For quality and enforcement purposes, audit engagement personnel would be individually licensed along with their employers, in coordination between federal authorities and existing state regulations over education, examination and training.  

Minimum capital requirements could be set, geared to the firms’ turnover or the capitalization of their client list. Governance structures could include independent outside directors, and accountability of management to agency oversight – measures not presently achievable under the constraints of state regulation and the laws of partnership and bankruptcy.

Collateral benefits to federal “chartering” abound:

Because these SEC licensees would be “audit only” enterprises, the multiple overlapping restrictions on scope of services would be finessed, and the endless debate over independence and permissible ancillary services could at last be ended.

Associated non-audit entities – whether parent or affiliate companies – would be freed from independence and compliance requirements, able to evolve beyond the one-page statutory report that now looks so obsolete. Targeted assurance reports could be designed that users in the capital markets would actually value and pay for. Immediate examples ripe for attention would have been Shell’s petroleum reserving, the internal trading controls regime at Société Générale, and the black hole of inter-company money transfers at Parmalat.

In aide of enhanced competition and expanded auditor choice, segments of the public company market could be specifically identified to encourage new entrants – such as high-risk or technically specialized sectors (IPO’s, troubled companies and financial services come to mind) – whose audits could be segregated, underwritten and priced as now done with high-risk insureds.

Under the aegis of the licensees’ regulators, a privileged forum could be organized to scrutinize cases of accounting and audit insufficiency for lessons and areas for improvement – drawing for experience on the airline, engineering and medical models for the successful study of failure.

As to liability -- the elephant in the room – and taking at their word the investor advocates who would prefer improved information over the capricious and low-return litigation lottery: the investigation and prosecution of all auditor claims based on public company financial statements would be pre-empted into the hands of the supervising agency. A specialized tribunal of expert jurists would hear all cases, levying fines and sanctions against convicted wrongdoers, both firms and individuals.

Compensation for legitimately damaged investors would be determined through the agency process rather than the caprice of juries and settlements, and be funded through a system of fee schedules rather than the hazards of limited firm capital.

Modifications of existing regimes would include elimination of the tax code’s incentives to maximize distribution of current revenues, and a cut-off above which audit firms would not audit their own owner/investors.

And with firewalls of corporate organization and bankruptcy infrastructure in place to limit liability, the conditions for insurability could be brought once more into alignment with manageable litigation and enforcement risk.

With this array of stabilizing governance changes in place, the new structures could at last be attractive to outside capital, which would be needed by offerors of new services in order to fund the necessary research, personnel and technology.

Given the dead-end nature of the debate these last years, the bare bones of this proposal should include something to excite or insult nearly everyone – which could be a signal that it is broad enough to be worthy of pursuit.

The Future of Auditors as Gate-Keepers -- A Glossary of The Non-Solutions

Do investors get real value from their gate-keepers? It was a main question at a conference of international investment managers where I spoke last week.

This group -- who sit over funds across the spectrum from public employee and union pensions to hedge funds and private equity – had common concerns: corporate governance, ethics, compensation and performance, and the quality and reliability of the third-parties – the analysts, rating agencies and outside auditors.

On the subject of the auditors, I had a brief opportunity to offer this three-fold view – familiar enough to regular readers here, but beyond orthodoxy to many in the audience (and with thanks to Mark Cobley at Financial News Online for the uptake):

•    That the traditional form of auditor’s report is obsolete and provides no investor value, especially compared to the possible forms of assurance that are impossible under the current model -- here;

•    That the overwhelming pressures on the Big Four firms render their current business model unsustainable, and their litigation-based exposure makes disintegration inevitable, absent a radical and comprehensive re-engineering – here;

•    That the current dialog on achievable solutions is vapid and sterile, due to denial, blame-shifting and the limited vision of all of the interested constituencies -- here and here.

In the ensuing barrage of panelists’ skepticism, audience questions and post-session follow-up, I was challenged to answer in single sentences to all the standard one-dimensional “solutions” to the fragility of the current Big Four structure.

Bringing those exchanges together here, with links to their more extensive treatment elsewhere, seems worthwhile – even if only in sound-bite form: 

•    Q: Why isn’t the litigation threat to the Big Four well handled by insurance?

A: Having learned from the savings & loans in the 1980’s the expensive lesson that auditor liability fails the basic criteria for insurability – diversification, predictability and quantification – the insurance industry has voted with its feet -- here.  

•    Q: If lack of auditor choice is the issue, how about creating competitors by splitting up the Big Four?

A: For starters there’s no workable legal theory. Either industry and geographic expertise would stay concentrated, in which case nothing is achieved, or they would be so split up that today’s talent level would be severely diluted.

•    Q: Can’t the issue of Big Four concentration be solved by built-up competition from the smaller firms?

A: The size gap is just too large to bridge – see here – and the smaller firms are if anything even more at litigation risk – see here. Anyway, smart risk managers in those firms would avoid global-scale engagements for which they lack either the skills or the risk appetite.

•    Q: If the rules on audit firm ownership were relaxed, wouldn’t outside capital both strengthen the Big Four firms and support new competitors?

A: The Big Four don’t want or need extra capital to run as they do – here. And the bankers have shown they are smart enough not to sacrifice new money that would only fuel the litigation fires.

•    Q: How about improving audit quality by requiring the rotation of auditors?

A: Italy being the only large country to mandate changes in auditors, experience provides a one-word rebuttal: “Parmalat.”

•    Q: Doesn’t a system of joint or dual audit promote higher quality of performance?

A: Proponents in France, which has almost no history of auditor liability litigation, would quickly change their tune when joint auditors became subject to 100% joint and several liability in the courts of other countries.

•    Q: Isn’t the problem of impaired audit independence the fact that it’s the clients who pay the bills?

A: Consider the alternative: funding audits through an agency or regulator amounts to nationalization – and no one makes the case for audits by government civil servants. 

•    Q: How about caps on litigation liability – either money limits or percentage allocation of fault?

A: Because the size of claims arising out of large corporate failures so completely dwarfs the limited financial capability of the Big Four – here – the political process cannot set a survival bar so low as to ensure the stability of a large firm under serious litigation threat.  

•    Q: Wouldn’t performance standards based on principles rather than rules recognize the judgmental nature of auditing?

A: Standard-setters cannot reduce the liability threat, so long as it is courts and juries who assess auditor fault and liability, unless there is the readiness – so far unseen – to enact “safe harbors” to protect the auditors’ judgments.  

•    Q: If another Big Four firm were failing, couldn’t regulators waive the scope of service limitations so that another firm could step in?

A: Even if the large firms weren’t so ostracized already that this solution is politically untenable, they are already fully-stretched and without resource capacity, so that when another firm crashes, the three survivors could not possibly pick up the pieces out of the wreckage. 

•    Q: If another firm is threatened with disintegration, how about replacing its tainted management with a credible outsider?

Q: As shown by the failure of Arthur Andersen despite Paul Volcker’s well-meaning initiative, the speed and complexity of a disintegration would out-strip any outsider’s powers or resources – see here.   

•    Q: In the end, won’t the regulators act to prevent the collapse of another global audit firm?

A: There is no more candid response than the concession of William McDonough as he neared the end of his term as chairman of the Public Company Accounting Oversight Board: as to what the regulators would do about another disintegration threat, “they don’t have a clue.”

These are sound-bites only, as I said, and I may have missed a point or two. Either way this compilation should be a good reference point. Please don’t hesitate to write with your reactions and suggestions.

Accounting Standards Convergence -- Sometimes the Bear Eats You

For months now the trans-Atlantic regulators have kept up a complex choreography, hoping to converge the global standards for accounting, reporting and auditing corporate financial information.

It’s like watching a carnival performance of dancing bears – notable not that they’re so slow and clumsy, but that they dance at all.

The publicity machinery has been cranking:

First was the US Securities and Exchange Commission, announcing in November – here -- that it would start to accept the financial statements of non-US companies, as prepared in accordance with International Financial Reporting Standards – widely used around the world except in the US – only now without the reconciliation to US standards that has been so costly, disruptive and questionably useful.

Next followed EU internal markets commissioner Charlie McGreevy – here -- with a symmetrical plan for American companies to list in Europe using accounting principles generally acceptable in their home country – good old familiar US GAAP.

Third was the December 5 announcement by the US Public Company Accounting Oversight Board – here -- that starting in 2009, its inspections of non-US audit firms would move toward fuller reliance on the inspection and enforcement regimes of that agency’s counterparts in other countries.

And lately, inputs from the US Chamber of Commerce – here – to the SEC’s Advisory Committee – here -- have been extolling the necessity of integrated global standards and principles.   

A theme played for years, the case for convergence has stayed consistent -- that the use of common standards promotes strong globalized capital markets, supports investor comprehension and confidence, and fuels economic growth.

But the background has changed since the time the Americans were calling the tune: When convergence was first seriously sounded, corporate listings were migrating to the New York Stock Exchange, the Euro-to-be was predicted to be a regional form of play money, and the extensible hegemony of accounting principles as issued in the US was taken for granted. Little wonder the Europeans were mostly unenthusiastic wallflowers at the party.

And then? Still shadowed by the darkening gloom of the Enron era, the American-led scandals around executive options and subprime mortgages have showed the limits on its capacity for regulatory detection and deterrence. London became the center of the IPO market, and the Euro is hovering around $1.55.

Europe ascendant has had its mis-steps, of course. The French-led opposition to unqualified EU endorsement of the standards for derivatives accounting showed the survival of its parochial difficulties.

And although the subprime contagion started in and primarily affects American markets and institutions, it extends from the regional German banks to the funding of villages in northern Norway, while the Bank of England stubbed a toe against the collapsed mortgage lender Northern Rock and UBS showed the storied competence of Swiss bankers to be as holed as its cheese.

Back in the USA, while the London bankers merrily stole the lunch of their New York counterparts, the SEC’s readiness to accept IFRS-based financial statements – half a decade after Sarbanes-Oxley -- now rings as an effort to protect against market-share erosion. And fair-value accounting has become the target of choice for blame-shifting to evade the dysfunctions of the bankers’ black-box valuation models.   

At the same time, the PCAOB’s readiness to “increase its level of reliance on non-US oversight systems” needs to be translated out of agency obfuscation into real English. If so, a candid statement from Chairman Mark Olson would read like this:

    "Since 2002 we haven’t made a dent in achieving the legislatively-imposed mandate to inspect and oversee the 800 non-US audit firms forced by the law to register with us. We will never solve the foreign law prohibitions or find the competent resources to do this ourselves. We have no realistic choice but to devolve our responsibility over to the authorities of 86 other countries, although they mostly have neither real track records of success nor the resources to get there. Whether any progress is actually made or even measurable will not be known for many more years to come."         

Meanwhile, taking a look at the PCAOB’s record at home, Sarbanes-Oxley has neither restored virtue to financial reporting nor unsprung the auditors from the limits on their performance:

•    The subprime-triggered chaos across the capital markets originated with and is traceable to the confessed failure of the players to understand, value, control, account for or report on entire balance sheets full of complex financial instruments. What leadership role does an audit regulator deserve, having sat that one out?

•    The academics’ confident proclamations of a year ago, that the level of US securities class action litigation was enjoying a structural reduction, now yields to the reality: case filings are back up to Enron-era levels, with the very large and rapidly-expanding group of subprime-based cases still comprising only a fraction.

So let’s wait a bit to evaluate the extent and effect of whatever convergence may actually be achieved within our lifetime.

Or, to invoke the ursine advice of the 17th century French fabulist La Fontaine, “don’t sell the bearskin until you’ve killed the bear.”

To Save a Collapsing Audit Firm? Leadership Replacement is a Non-Starter

On the troubled state of the large audit firms, it has perhaps been wrong of me to be so critical of the attention given by the various committees and think tanks, for their general failure to grasp the truly serious issues and the vacuity of their discussion – examples here.

Because – from a recommendation given by the US Treasury Department’s Advisory Committee on the Auditing Profession – when they do advance a substantive idea, it is so breath-taking in its misguided impracticality.

On April Fools Day that group put forward, in all apparent seriousness, the notion that the partners in the large audit firms, anticipating the possibility of a catastrophic threat – that is, a fatal litigation or prosecution – should voluntarily modify their agreements to trigger the replacement of their leadership. Or failing such a step, the Securities and Exchange Commission should be authorized to apply in court for a trustee.

The text of the recommendation – and, for the masochistic, the webcast of the Treasury committee’s March 13 discussion meeting – are available here. 

As Oscar Wilde described his reaction to a plot by Charles Dickens, only the truly hard-hearted can read this pathetic work without breaking into hysterical laughter.

First, who’s to decide? In the history of leadership, the concept of anticipatory abdication is a complete non-starter. Especially under challenge, leaders believe they can work through their crises, and will fight to stay in office. In the political sphere, leaders from Louis XVI to Richard Nixon to Robert Mugabe have shown the inability to anticipate their own downfall.

Business professionals are no different. Is it any more likely that the large-firm partners would willingly turn over their careers and their fortunes to an outside stranger, than that the shareholders or directors of Bear Stearns or Northern Rock – or, for that matter, of Enron or WorldCom – would have enacted advance terms for the displacement of their executives?

But if not done by leaders themselves, who would pull the trigger? An external decision-maker would have to be credible to all constituents, at least as informed as management itself, and presciently ready to act decisively at a moment’s notice. 

But the corporate world does not keep world-class crisis managers stocked in reserve. Anyone meeting those job requirements already has his energy and talents fully committed elsewhere.

Nor, paying respects to the grey eminences who populate the advisory committees themselves, is this a function to bolster the resumes of the retired. The learning curve of a real-time audit firm survival crisis would be too steep to be climbed by those for whom robust knees and lungs are the memories of youth.

As for the notion of timely SEC intervention, the Treasury Committee’s members themselves grasped at least two among the fatal flaws:

•    First is the issue of timing. The Andersen firm disintegrated in a matter of weeks in 2002, following the tardy but eventual capitulation of its CEO and an aborted effort to bring in outside leadership. Even the provisions of the US Constitution for the temporary transfer of presidential powers contemplate a timetable of four weeks or more.

•    Second, who is to recognize the need? The Public Company Accounting Oversight Board, regulator of the profession in the US, disavows responsibility for audit firm viability as outside its remit, and rightly so. The timing and scope of that body’s practice quality sampling program is already all it can handle.

Which leads to the unrecognized crux. The supposed rationale for a rehabilitation process is that new leadership might preserve a firm by dealing more successfully with its litigation adversaries or prosecuting authorities than those on the scene of the wreck.

But such a view, while real, entirely misses the broader point.

Namely, as should have been learned from the Andersen experience – or those recently of Bear Stearns or Northern Rock – the franchise value for those selling commodity products rests entirely on the preservation of trust, and not just on fresh negotiating positions or the appearance of new faces. Once the fuse is lit and a credible challenge to that trust has started to run – whether doubts about the “safety and soundness” of a regulated bank or eroded “client confidence” for an audit firm – it’s too late, and an explosion is inevitable.

Finally, it is argued that the SEC’s power to apply for a trustee – even if “in the pocket” and never expected to be used – would be an incentive to the firms to improve.

But again, that naïve view defies reality. The audit firms’ managements already know that they face death-threat exposures today. So if at the brink they would not be saved by SEC intervention – and when existing leadership will have been cashiered in any event – a regulatory tool that is both inutile and ineffective would, if anything, create a disincentive to constructive change. 

There’s value to wild and unworkable schemes – they can focus attention on what really can and needs to be done. This one has served its purpose – and can now be scrapped as it deserves. 

The Accountancy Regulators -- Motion Is Not Progress

My last post, critical of the proposal from the SEC’s Committee on Improvements to Financial Reporting for a “judgment framework” for accounting and audit decision-making, generalizes across the lack of substantive debate on the difficult state of financial reporting and the auditors’ threatened assurance franchise.

More public meetings are on the calendar – specifically, the US Treasury’s Advisory Committee on the Auditing Profession meets on March 13 (here), the CiFIR itself meets the next day (here), and the US Chamber of Commerce's Center for Capital Markets Competitiveness holds its next annual summit on March 26 (here). The hot-air potential is high -- the optimism level is not. A catalog of inter-related issues remain completely unresolved, without any visible progress against an agenda laid out in this still-relevant column that ran in the IHT on April 22, 2006:   

Solutions That Are Not

There's no finding solutions without a proper focus on the problems. Think of the guy in the dark of night, searching under the street lamp for his keys. The beat cop asks, "If you say they were lost over in that dark alley, why are you looking here?"

"Because the light's better here," the poor guy responds.

Which pretty much describes the January, 2006 report of the U.S. Chamber of Commerce, joining the dialog on the survivability of the large accounting firms under the stunningly obvious title, "Auditing: A Profession At Risk" -- here.

With its heart in quite the right place, the group says "action must be taken" so that companies might retain "access to high-quality, reasonably priced auditing services."

Whereupon, sadly, the report loses its focus and its way, bumping dimly down the dark streets from one missed opportunity to another.

Here are six of them:

First, the chamber gamely recognizes that the audit profession has become effectively uninsurable in the face of litigation costs that threaten immediate destruction of partners' limited capital and their long-term inability to hire and retain personnel.

Yet its limp observation that legal reform "may be needed" misses the crucial point. Auditor insurability requires the ability to predict, quantify and limit the insured risk - conditions impossible to fulfill under unlimited liability hazards.

Second, the chamber repeats the familiar if unhelpful refrain that auditors should not be held liable for failure to detect or prevent cleverly designed collusive fraud.

That's fine, as far as it goes. But what about the many corporate frauds that aren't that clever or well concealed, but that repeat shenanigans perpetrated for generations? And what about all the "fraud" that consists of aggressive use of permissive accounting standards set under the influence of corporate interests themselves?

Also, what about auditors who, faced with a crushing liability overhang, are forced to settle their mega-cases without going to trial?

Third, the chamber proposes that the Public Company Accounting Oversight Board, the U.S. industry regulator, should promulgate a "safe harbor" standard for fraud detection, to protect the auditors if they can show they fulfilled steps issued by a bureaucracy.

Yet it is this very "check the box" approach to the control assurance requirements that is the Achilles heel of the Sarbanes-Oxley law. Companies whose stock trades on U.S. exchanges, and therefore must register with the U.S. Securities and Exchange Commission, are furious at the escalated cost and diminished effectiveness of auditor performance because of the Sarbanes-Oxley requirements - to the point of avoiding or fleeing U.S. listings altogether if they can.

Fourth, the chamber serves its own broad constituency of small businesses by suggesting that the audit profession's doubtful viability is not helpful to new companies that may be innovative but unfamiliar to the capital markets.

Trouble is, that's not where the real threats lie. It's not the unknowns with the biggest and most costly claims in this decade, but household names: Enron, WorldCom, Adelphia, Xerox and Parmalat.

Fifth, understandably exercised over the mortal blow of the indictment of Arthur Andersen over its work for Enron, the chamber calls for legislation to "rein in" the process of indicting whole enterprises.

Here the problem is that unless world trade and commerce unexpectedly achieve an as-yet unknown state of grace, society will expect its law enforcement officers to indict and prosecute where indicated by the facts.

Sixth, the chamber joins a chorus of concern over the shrinkage down to the Big Four, who together audit virtually all of the world's largest companies. But the relocation to smaller firms of non-audit work is once again off point: Those are not statutory compliance services, where the real legal risks and fatal exposures lie.

To be fair, though, the chamber may be so turned around because it started from a faulty bearing - that auditing is central to public confidence in the capital markets. When the next big auditor disintegrates amid litigation, it will become obvious that the delivery of services by a noble profession in the process of collapse will not be something anyone will be able to preserve.

In the small pool of light cast in this darkness, that much is right out in plain sight.

Accounting and Audit Judgments -- Please, No More Standards!

A new one-liner in the cultural vocabulary was introduced when the hit comedy, “No Sex Please, We’re British,” opened in London in 1971.

Today’s plea – with the Securities and Exchange Commission’s proposal to inflict an analytic structure upon the making of accounting and audit judgments – would be “No Standards Please, We’re American.”

On February 14 the SEC presented for public comments the interim progress report of its Advisory Committee on Improvements to Financial Reporting – here – which among its suggestions was that the Commission should adopt a “judgment framework” in the accounting area, and that the country’s audit regulator, the Public Company Accounting Oversight Board, should do the same for audit judgments.

Responses to the SEC are due the end of this month. Meanwhile, the PCAOB sponsored a panel discussion on February 27 by its Standing Advisory Group – summarized here by Edith Orenstein of Financial Executives International.

The signal achievement of this day-long effort was that the competing interests in the debate managed at the same time to expose both the hazards and the vacuity of the whole idea.

As co-presented to the PCAOB group by a managing director of Moody’s – yes, the credit rating agency – the notion is this:

•    Preparers of financial statements would be assisted by yet more pages of codified bullet points, in choosing and applying among the myriad of alternatives for selecting and implementing accounting standards, quantifying estimates, evaluating evidence and all the rest.

•    Auditors, likewise, would be similarly enlightened across the spectrum of judgments required to choose audit procedures, to evaluate the likelihood and impact of fraud and other risks, to conduct audit sampling, to evaluate controls and – layering the irony – to assess management’s own judgments.

Wait.

In the century and a half since the emergence of independent accounting early in the Victorian era, preparers of financial statements and their auditors have been striving get their judgment processes right. So who are these bureaucrats, with their presumption of assistance?

This is, after all, the same SEC that was caught flat-footed over the pervasive extent of executive options back-dating. The same PCAOB that in its sixth year has no more than a pilot program for constructive engagement with non-US regulators and inspection beyond the samples taken within its own borders. And the same Moody’s whose involvement in the subprime mortgage fiasco, along with the other major credit ratings agencies, finds them to be central in the still-spreading credit markets turmoil.

Put another way, taking advice on the process for judgment-making from this crowd could be viewed like hiring Noah to give flood-control advice to the city of New Orleans.

As for the parody that passes for debate, the self-interested and antagonistic participants are circling the topic and each other like stray and wary dogs around a hydrant.

The accounting firms at the PCAOB’s table gave cautious endorsement to the framework idea, despite the obvious hazard: By getting it right they would obtain no more credit, safeguard or protection than is available today under existing guidance. Instead, they would only have one more procedure to get wrong, and therefore increase their already debilitating litigation exposure.

The large accounting firms remain muzzled on their fragile and threatened state, unwilling out of either fear or denial to acknowledge the shockingly low litigation impact that would cause their disintegration (which I've calculated and discussed here).

As a result, they are inhibited from insisting that the only realistic usefulness of yet more regulation on the exercise of their judgments would be under a “safe harbor” within which they could explore and apply new modes of working.

But on the other hand, investor advocates among the profession’s critics make plain the political reality that no adjustments in the American legal liability framework that entraps the auditors today are about to be forthcoming.

Exposing the sterility of the discussion, even the regulators themselves are in full self-protection mode, making clear that nothing in the application of the suggested framework process would inhibit the SEC or the PCAOB from examining and criticizing the judgments made by issuers or auditors.

For British theatre-goers the farce of “No Sex Please” ended when the nightly curtain came down. Because a new "judgment framework" would offer benefits that range from elusive to non-existent, would impose costs of extra work and documentation that are extensive, and would inflict potential litigation hazards that are considerable, the farce now playing out in Washington deserves a closing notice.   

For other aspects of the PCAOB’s meeting last week, see my friend Francine McKenna at Re:The Auditors -- here.