As a public relations professional myself, I want to congratulate the KPMG PR team on their coup in today’s Wall Street Journal. In an interview with the Journal‘s Duncan Mavin, Benny Liu, the head of the Audit practice at KPMG China is given an singular opportunity to deliver his messages in what was clearly a very friendly discussion.
This interview could have been much more challenging for Liu. At a time when Chinese companies that are listed offshore are facing uncomfortable questions about the accuracy of their accounting, you would expect a newspaper that is ostensibly an advocate for investors to come down on a senior China auditor with some very hard questions. Alas, those question were not forthcoming. Not today, anyway.
But the recent wave of scandals around U.S.-listed Big Four-audited Chinese companies suggests that the time will come when harder questions will be asked. Mr. Liu and his PR team would do well to prepare for such questions as:
1. What measures does your firm have in place in your China practice to ensure that auditors and their reports are not influenced by the pressure to retain and please the client?
2. Has your firm ever altered its audit reports on a Chinese company under pressure either from the client or from a senior KPMG executive?
3. Has your firm ever reprimanded, transferred, or terminated an employee in China because of a refusal to alter an audit report to reflect more favorably on a client?
4. What does your “risk management” department do, exactly? In layman’s terms?
5. Have you personally ever intentionally overlooked or failed to report client accounting practices that do not conform to GAAP? Have you ever done so for a company that was listed or was about to be listed in the U.S.?
6. What do you feel should be done to auditors and firms who overlook, ignore, or fail to report illegal, unethical, or ineffective accounting procedures practiced by their clients?
7. Is there a need for a independent professional accreditation body for auditors in China? Why/why not?
8. What would you change about the auditing profession to ensure that investors and the public are better protected?
This is not to pick on KPMG China: any big-four auditing firm with operations in the PRC would do well to keep this list of questions close, build on it, and be ready with something more than a holding statement when – not if – these questions come up.
- Audit Chief Faces China Risks (online.wsj.com)
- China Questions Big Four Auditors (fool.com)
- Chief Financial Officers supportive of rotation of auditors (telegraph.co.uk)
- Emerging Markets Report: China pushes back in accounting row (marketwatch.com)