The New Auditing Environment
Jim Cook, Ernst & Young global director of retail and consumer products and Americas director of industries, visited campus as part of the Accountancy Lyceum speaker series to discuss the new Ernst & Young LLP audit methodology. His presentation was entitled, "Ernst & Young Global Audit Methodology: Responding to the New Environment."
Recent accounting scandals have invited scrutiny and government intervention into a profession that has traditionally been autonomous. Accountants, post the Sarbanes-Oxley Act of 2002 (SOX), now have to answer to the Public Company Accounting Oversight Board (PCAOB), which is responsible for maintaining standards, conducting inspections, and enforcing rules.
As a result, firms like Ernst & Young have shifted attention to "new oversight and reporting," said Cook. The atmosphere has lead to the heightened importance of "professional skepticism, audit quality, and diligent execution." The physical manifestation of this is paperwork - a large increase in necessary documentation.
The paperwork is in large part due to Section 404 of SOX. Section 404 is an attempt to obtain what Cook termed "Congressional and public accountability." But will it prevent another WorldCom? That, according to Cook, is up for debate. He went on to explain that, "most fraud is perpetuated and/or concealed with inappropriate journal entries and other adjustments."
In general, the accounting industry is dealing with a major transition period: 2004 was only the second full year of SOX implementation. To the future accountants in the audience, "Internal audits and financial statement integration will be second nature," said Cook. It becomes a matter of dealing with change versus change becoming the norm.
About the Speaker
Jim Cook is a proud graduate of the University of Illinois who received his BS in accountancy in 1971. He has 33 years of experience serving a wide range of major clients, including companies such as Whirlpool Corporation, McDonald’s Corporation, and S.C. Johnson and Son, Inc.Cook is committed to understanding each client’s business and industry.
Besides being an annual guest speaker in the lyceum series, Cook maintains an active relationship with the College as a member of the Executive Committee of the Dean's Business Council. He has also served on the Board of Directors of the University of Illinois Alumni Association was president of the College of Business Alumni Association.