PwC LLP will lean on three accounting and financial reporting leaders with deep regulatory roots to advise the firm as it tries to bolster the quality of its auditing, the firm said.
The creation of the Assurance Quality Advisory Committee—announced Friday—brings PwC in line with competitors who have created similar groups in response to regulatory pressure. PwC also pledged to bring in independent viewpoints as part of its response to a series of audit and independence lapses that resulted in significant payouts in 2019.
“We’re reinforcing what I’ve known over time: that the diversity of perspective, including outside perspectives, is critical to landing on more complete thinking and a more fully informed strategy that meets the expectations of stakeholders,” Wes Bricker, PwC’s assurance leader for the U.S. and Mexico, said in an interview.
Russ Golden, fresh into retirement after serving as chair of the Financial Accounting Standards Board, will be an inaugural adviser to PwC. Bricker and Golden worked closely together during Bricker’s tenure as chief accountant to the Securities and Exchange Commission, which oversees the work of the FASB.
Golden will be joined by Joanne Wakim, who previously served as chief accountant to the Federal Reserve Board, and Alan Beller, a former director of the Division of Corporation Finance at the SEC.
Beller currently serves on the foundation boards overseeing the work of the Sustainability Accounting Standards Board and the International Accounting Standards Board.
All three have served in roles that value outside feedback and they have demonstrated how to take those ideas and turn them into practical advice. They also bring insights into the private and global markets, Bricker said.
Pushing Independent Voices
“The firms are forming these board to get out ahead of regulation, said Jeff Johanns, senior lecturer at the University of Texas at Austin.
The firms are hoping to convince their regulator, the Public Company Accounting Oversight Board, not to put forward a more onerous requirement of independent oversight in managing their assurance practice—an option floated as the board considers overhauling its rules for firms’ quality controls, he said.
Quality controls serve as the framework for how the assurance business is managed from which clients to accept, to client assignment, to ethics and training.
Competitors Ernst & Young LLP and Deloitte LLP have created similar advisory groups in recent years. Both KPMG LLP and PwC also have added independent directors to their governing boards.
The moves are also in response to pressure from the SEC, which has urged them to bring in outside viewpoints in order to spark improvements in audit quality,.
Bricker who delivered some of that pressure in his previous role as chief accountant, is now on the receiving end of his own advice. He said he’s looking forward to working with the three advisers on how to deliver a quality audit and other assurance services in addition to how technology can improve the audit and how to govern and manage people and the way they work.
PwC said earlier this year that it would create its advisory committee as part of a series of changes after multiple lapses that culminated last year in a $7.9 million settlement with the SEC over auditor independence violations, a $335 million settlement with the FDIC related to its audits of a bank that collapsed during the 2008 financial crisis, and enhanced scrutiny of its quality and independence checks after troubled audits of toymaker Mattel Inc.
The committee will offer guidance on the firm’s use of technology and how standardization and digitization impacts the way the firm audits, in addition to other matters that impact effective auditing including culture, governance and risk management. They will meet for the first time next week, the firm announced Friday.
Like the firm’s independent directors, Golden, Wakim and Beller will be paid for their service, but their compensation was not disclosed. Bricker expects they will meet periodically throughout the year.