The Auditor “Blooper Of The Year”?
In mid-February our good buddy Broc Romanek, editor of The CorporateCounsel.net forwarded a question he got from one of his many avid readers, as follows:
“Our auditor, one of the Big 4 firms, didn’t show up to our annual meeting of stockholders. In the past, the auditor was introduced and there was an opportunity to ask questions of the auditors towards the end of the meeting. That opportunity was obviously not available to stockholders (but stockholders in the past five years have not asked the auditor anything). One of the board proposals was a ratification of the auditor for the fiscal year ending 2016 and stockholders approved that proposal. Any issues here?”
“Shouldn’t be any issues - other than optics – since it’s merely a ratification, right?”… the always optimistic Broc ventured.
“Sorry to be so strait-laced and old-fashioned here,” your editor replied, “but in my book, the failure of a Big-4 auditor (or ANY outside auditor) to show up for a client’s annual meeting is a major breach of duty - and a capital offense...I would not make a big deal of it publicly, but MY auditor would be gone in a flash. Bottom line: I think this failure is an important “issue” for the Audit Committee to deal with...Totally unprecedented in my 40+ years of meeting-going.”
“Do auditors ever get asked a question?” Broc asked in response. “Yes occasionally they do - primarily when there are ‘regular gadflies’ in attendance - or if there have been restatements or other “issues” in the press or at peer companies... Interestingly, I have long been predicting that with the very high percentage of audits reported by PCAOB as “failed audits” at the Big-4 firms, this will increasingly become an issue for activists – and other investors too - And ultimately, I predict that “rubber-stamping” to ratify the appointments will no longer be treated as a “routine matter” upon which, ‘brokers may vote’ in the absence of client instructions... I’d bet $100 bucks on this in a flash!
Readers; What do YOU think about the situation? (The closest to this I’ve ever seen is where the audit partner, who was sitting in the seat in front of me, on the aisle, nodded-off just before he was scheduled to be introduced...and I poked him in the nick of time... He clearly realized that he had been saved from the ultimate of embarrassments - AND from being fired on the spot…But that was THEN .