James Doty, chairman of the PCAOB, has made a fresh call for senior auditors to be stripped of their anonymity, as details continued to emerge from the KPMG insider trading scandal.
James Doty said investors were in favour of ending the secrecy that currently shrouds the identity of the auditor in charge of vetting the accounts of public companies in the US. The leaking of client secrets by Scott London, the former head of KPMG’s Los Angeles audit practice, to Bryan Shaw, a jeweller who traded on that knowledge, has highlighted a quirk of US regulation that grants anonymity to senior auditors.
Mr London was lead partner for Herbalife and Skechers, two Californian companies that are seeking a new audit firm after KPMG resigned and – in an unusual move – withdrew past endorsements of their accounts. Investors have no way of verifying whether he was in charge of vetting other public companies, because such information is not widely disclosed under current rules.
Citing similar rules in other countries, the PCAOB in 2011 proposed a reform that would disclose the names of lead auditors of companies with publicly traded stock or debt, while also naming any additional firms that contributed to the audit work.
The reform has stalled amid opposition from many accountants. Mr Doty declined to comment directly on the Scott London affair. However, he believes the extra disclosure could help investors judge audit quality better.
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