Monday, April 26, 2010

Former Mass Gov. Headlines FEI Leadership Summit; New Initiatives Announced

At Day One of FEI's annual Leadership Summit Conference earlier today (agenda, press release), former Mass. Governor Mitt Romney gave a keynote speech to the over 750 senior financial executive attendees. With a jam-packed agenda, the closing keynote speech for Day One of the conference will be given later today by Gary Loveman, Chairman, Chief Executive Officer and President, Harrah's Entertainment, Inc.. The two-day conference is being held at Caesar's Palace in Las Vegas.

Important initiatives being announced by FEI at the Summit conference include:
FEI is a dynamic organization for senior financial executives, whose mission is: "To advance the success of senior-level financial executives, their organizations and the profession." I hope you will consider joining FEI (FEI membership video), to benefit from our networking, knowledge, advocacy and leadership.

The FEI membership video talks about diversity initiatives at FEI, and not only is one session at the Summit conference devoted to this subject, the cover story of this month's edition of Financial Executive magazine is: "Fab Four: Female Finance Leaders Talk About Clarity and Collaboration."

On the advocacy front, a recent example is the Statement Issued by FEI President & CEO Marie Hollein on the Medicare Part D Subsidy (press release; letter to Congress).

In terms of networking, our local chapters provide a wealth of networking opportunities, and we are looking to enhance opportunities for member-to-member virtual (online) networking, building on our current LinkedIn and other groups.

Our national advocacy committees actively follow developments at the FASB, IASB, SEC, PCAOB, the IRS, and other overnmental agencies, and related congressional initiatives.

The Private Company Roundtable is an exciting new development to allow more members the opportunity to get involved in issues of interest to them on the private company front, in addition to our national technical committees. Roundtables on other areas of interest may follow. Half FEI's members are from public companies, and half from private companies, and we are eager to serve the needs of all such members. We also have a category of membership for academic members, and find support of the academic community to be mutually beneficial.

Feel free to contact me if you have any questions or our membership department at

Friday, April 16, 2010

SEC Charges Goldman Sachs With Fraud; Was Matt Taibbi Right About The ‘Giant Vampire Squid’?

Earlier today, the SEC charged Goldman Sachs & Co. with fraud relating to transactions the firm - dubbed the ‘giant vampire squid’ in an article by Matt Taibbi last year - structured, tied to the housing market. According to the SEC’s press release:

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund” –disclosed elsewhere in the SEC press release as Paulson & Co. – “played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO…

...The SEC alleges that one of the world's largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

SEC Enforcement Director Robert Khuzami added:
"The product was new and complex but the deception and conflicts are old and simple. Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

Kenneth Lench, Chief of the SEC's Structured and New Products Unit, SEC Enforcement Division, noted:
“The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."

Was Taibbi Right?
In light of the above news, I wonder if Rolling Stone writer Matt Taibbi feels vindicated now, having faced substantial criticism of his article published on July 9, 2009, entitled: “The Great American Bubble Machine - From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again.”

My recollection of the discussions in the blogosphere and twitterverse at the time Taibbi's article was first published last year (including commentary by former WSJ reporter Heidi Moore, and articles in the Columbia Journalism Review, among others, come to mind) were that Taibbi seemed to be 'reaching' his conclusions about Goldman, without sufficient 'evidence.' With 20-20 hindsight in light of today's announcement, there will likely still be varying views about Taibbi's article, but there may be a shift overall in how it is now perceived.

Goldman’s Response to the SEC
In response to the SEC charges, Goldman Sachs issued a one sentence press release earlier today (one sentence, not including the introduction and tagline), in which the firm stated:
The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.

My two cents: Goldman Sachs and Mark-to-Market Accounting
My two cents (I remind you of the disclaimer posted in the right margin of this blog): In covering some of the FASB, SEC and Congressional hearings on mark-to-market (fair value) accounting over the past few years amid questions about the role, if any, of mark-to-market accounting vis-à-vis the subprime and credit crisis, I noticed that Goldman Sachs seemed to be the golden go-to boy on the subject of mark-to-market accounting, and that they consistently backed mark-to-market accounting as defined in FASB Statement No. 157 as appropriate - not so much the concept of mark-to-market or fair value itself, or what should or should not be carried at fair value (since FAS 157 did not define what to fair value, but redefined how to arrive at fair value, i.e., thru an ‘exit value’ notion, for which, history shows (as discussed at FASB Valuation Resource Group panels and other panels), many firms felt more comfortable with ‘independent’ ‘third party’ broker quotes for securities - even highly illiquid securities - vs. using other valuation methods that were previously acceptable for arriving at ‘fair value’ prior to FAS 157.

The testimony of and response during Q&A provided by Goldman Sachs at SEC hearings (and I believe FASB hearings as well, if memory serves me correctly, if I find a link I will update this post), advisory groups, or roundtables addressing mark-to-market accounting, generally represented by Matt Shroeder, Managing Director and Global Head of Accounting Policy at Goldman Sachs, often struck me as a little too much of a 'cheerleader' or purist for mark-to-market accounting as it existed under the original FAS 157, particularly with respect to illiquid securities, and my observation is not personal to Schroeder, but just a general observation about the firm's position as expressed at various hearings on this subject. Here are some quotes from Schroeder at an SEC hearing in 2008, from our blog post dated July 17, 2008:
Matt Schroeder, Managing Director and Global Head of Accounting Policy at Goldman Sachs, said, “For us, FV is the oxygen of the firm, we live by it, it’s part of our fabric, we follow daily discipline of marking to market at our firm.” He added that FV accounting “allows us to make economic decisions whether to buy or sell without regard to triggering a gain or loss, [without having to ask] is it going to taint my portfolio, it allows us to be free from those constraints.”...

... Matt Schroeder of Goldman Sachs said, “Is it harder [to measure FV] in illiquid markets, yes, you’ve got to look for more information, it requires you to be proactive.” He said firms need to seek out and put together a body of evidence to support the value they put on their instruments."

Further, although I was not in attendance in person in the observers' gallery at any of these SEC or FASB hearings (but listened via webcast), I always had the impression that many in the group (roundtable, hearing) were in awe of Goldman Sachs' prowess, owing to its leadership and earnings power in the financial markets, including the firm's ability to make money by, in essence, betting against the market.

In fairness to FASB and the SEC, further guidance relating to FAS 157 was released at various points in time, including in response to the SEC's report to Congress on mark-to-market accounting, and in response to the various hearings and roundtables convened by FASB, SEC and Congress.

However, I would suggest that, in light of today's SEC announcement, perhaps some of Goldman Sachs testimony on the particulars of mark-to-market accounting discussed at SEC and FASB hearings or roundtables over the past few years could be looked at from a different perspective - perhaps with less awe about the wonders of a firm that some may have deemed infallable, and perhaps with more skepticism about confidence expressed in market values established by 'the market' when the market is illiquid. (For some expert views on this matter, see our 2.24.09 post: User Views on Fair Value.) Additionally, I would suggest that heavier consideration be given to the firm's role as a market maker, designer of structured securities, trader, etc., vs. what some may have interpreted as a proxy for 'investor' or 'user' views or information that is most useful for investors.

Thursday, April 15, 2010

Taxing Times; 'Living Life Post-Subprime'

Lest you forgot that today - April 15 - is the deadline to file your personal income tax return if you are subject to U.S. tax, the IRS helpfully issued this notice last week: Can't Make the April 15 Deadline? Get an Extension with Free File. Interestingly, the notice includes a link to IRS Videos on YouTube. Maybe some of you marked the day at a Tea Party or Coffee Party.

Those of you who sauntered over to the main post office in NYC earlier today to postmark your tax returns by the April 15 deadline may have caught the annual live performance by Steven Zelin, The Singing CPA. If you missed it, check out his website and his youtube channel. (And, he's available for weddings, bar mitzvahs, conferences and corporate events!) If you want to celebrate the filing of your return, receipt (or impending receipt) of a refund, or anything else for that matter, and you're in NYC tomorrow evening (April 16) Zelin will also be performing, along with singer-songwriter-producer Rob Taube (producer of a certain Second Life music video previously premiered in this blog), and other singer-songwriters, at 7pm Friday April 16 at The Sidewalk Cafe, 94 Ave. A at East 6th Street, NYC.

Living Life Post-Subprime
Further on the topic of musical interludes mixed with a dash of accounting, some very exciting news for those of you who follow former Thomson Reuters reporter Emily Pickrell (currently working for Global Water Intelligence magazine, based in the UK) and BNA reporter Steven Burkholder, both of whom are among the top reporters on the FASB beat: Pickrell and Burkholder joined forces to write and record a song called Living Life Post-Subprime, which you can download on Pickrell's website,

Pickrell and Burkholder shared some interesting stories with me as I tried to connect a 3-way call across two continents recently via my home fax machine (which gave me access to call the UK) and my home phone (which I didn't realize was restricted to US calls only) about some of their parallel paths covering the FASB and how their shared interest in music and songwriting came about, Pickrell's concept that while the subprime crisis had been infinitely written about, the concept of what life is like post-subprime for the average person had not been as well covered/expressed (which led to the writing of "Living Life Post-Subprime"), their separate recording sessions at the studio, and more. Living Life Post-Subprime is just one of 5 songs on Pickrell's CD, I encourage you to check it out at her website linked above, and I hope to hear of some live peformances by Pickrell and Burkholder in the future!

Pacter Named To IASB Board; FASB-IASB Convergence Update

Earlier today, the International Accounting Standards Committee Foundation, which oversees the International Accounting Standards Board, announced the appointment of Paul Pacter as a member of the IASB board.

The IASCF press release notes that Pacter has served in senior staff positions at both the FASB (including as Deputy Director of Research, and Executive Director of the Financial Accounting Foundation) and IASB (including as Director of Small and Medium-Sized Entities, and lead staff member on IASB's IFRS for SMEs published last year). Pacter also formerly taught at the University of Connecticut, where he received the Distinguished Graduate Teaching Award.

As also noted in the press release, Pacter's appointment to the IASB board fills the vacancy created by the retirement of Jim Leisenring at the end of June 2010. (Before joining the IASB board, Leisenring formerly served as a FASB board member and in various senior staff positions at the FASB, including as Director of Research and Technical Activities, Director of International Activities, and as Chairman of the Emerging Issues Task Force.)

My two cents (I remind you of the disclaimer that appears in the right margin of this blog):

Pacter has always been very helpful in response to questions about IFRS for SMEs or other matters, and has provided informatinal material through interviews and by contributing articles to FEI's magazine, Financial Executive, and I look forward to observing him in his new role as a member of the IASB board.

Leisenring is known for speaking frankly, during FASB and IASB board meetings, roundtables, and press interviews, and I look forward to continuing to hear/follow his views in whatever path he chooses when he leaves the IASB board.

FASB, IASB Publish Quarterly Convergence Update
Yesterday, FASB and the IASB published a quarterly progress report showing continued progress on their goal to improve and achieve convergence of International Financial Reporting Standards and US generally accepted accounting principles. The report covers: (1) work improvement methods, (2) updates on convergence projects, and (3) publications expected second quarter 2010. An appendix outlines the expected timetable for publication by the boards of proposals (Exposure Drafts) and final standards that are part of the convergence program, in the form of a quarterly calendar, from April 2010 to December, 2011. See: FASB-IASB Press Release; Quarterly Progress Report

SEC Proposals, PCAOB Alert, Lehman Update

Following is an update on recent SEC and PCAOB activity.

SEC Proposes Rules Relating to Options Markets, Large Trader Reporting
At yesterday's open commission meeting, the SEC voted to release a number of proposed rules. See SEC press release on proposed amendments to Reg NMS that would impact the activities of - and fees charged by - options exchanges, and SEC press release on a proposed rule that would create a Large Trader Reporting System. The latter proposal is aimed at enhancing the SEC's ability to would identify large market participants, collect information on their trades, and analyze their trading activity.

SEC Proposes Rule Amendments On Asset-Backed Securities
On April 7, the SEC proposed rule amendments that would revise the disclosure, reporting and offering process for asset-backed securities (ABS). The comment deadline will be 90 days after the proposed rule is published in the Federal Register. SEC press release; proposed rule.

PCAOB Releases Staff Practice Alert on Significant Unusual Transactions
On April 7, the PCAOB released Staff Audit Practice Alert No. 5, Auditor Considerations Regarding Significant Unusual Transactions (Practice Alert No. 5). The Practice Alert compiles relevant requirements from existing PCAOB auditing standards regarding significant unusual transactions to assist the auditor in reviews of interim financial information and audits of financial statements. PCAOB press release; Practice Alert 5.

Lehman Update: Congressional Hearing, DOJ Investigation
Some commentators (I like that word better than 'pundits') have expressed the belief that PCAOB Audit Alert No. 5 referenced above, along with the SEC's recent "Dear CFO" letter on repos, are a response to one of the major issues identified in the bankruptcy examiner's report on Lehman Brothers (the "Lehman report"), which questioned the accounting treatment given to, and alleged a lack of sufficient disclosure related to, a financing transaction done at quarter-end in the last couple of quarters of the firm's life, specifically a repurchase transaction (in which securities are sold under an agreement to repurchase them), dubbed 'Repo 105' at Lehman.

Numerous bloggers have covered the Lehman report and offered their own take on the matter, among the most prominent in the field of accounting/auditing, specifically, being Francine McKenna of Re: The Auditors (numerous posts), Jim Petersen of Re: Balance (numerous posts), Tom Selling of The Accounting Onion, and Prof. Dave Albrecht of The Summa. [I also wish to note my appreciation to the above group of bloggers, who I have had offline discussions with from time to time, sometimes in anticipation of quoting them in this blog, and although I have not had the chance to write up any indepth interviews, the insights you have shared are appreciated.]

Also of note on this subject, on March 19, 2010 Chairman Chris Dodd of the Senate Banking Committee announced: Dodd Calls for DOJ Task Force to Investigate Criminal Activities at Lehman and Elsewhere

Additionally, the House Financial Services Committee, Chaired by Rep. Barney Frank, recently announced they will convene a hearing on April 20, 2010 on: Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner

My two cents on the question of Lehman's accounting and disclosure re: "Repo 105," - and before I begin, allow me to remind you of the disclaimer posted in the right margin of this blog - I know I'm risking having all kinds of negative labels thrown at me for saying this, but 'window dressing' or transactions that take place near quarter-end or year-end, whether expressly or implicitly aimed at meeting certain ratios or targets, such as leverage ratios, capital ratios, sales/revenue/contribution quotas, etc. , is not per se 'illegal' to my knowledge, nor is it necessarily per se a sign of fraud or even deceit.

A similar view was earlier expressed by Wharton Prof. Jeremy Siegel in the article, "Lehman's Demise and Repo 105: No Accounting For Deception," published by Knowledge@Wharton on March 31, in which Siegel said:

The use of outside entities to remove risks from a company's books is common and can be perfectly legal. And, as Wharton finance professor Jeremy J. Siegel points out, "window dressing" to make the books look better for a quarterly or annual report is a widespread practice that also can be perfectly legal. Companies, for example, often rush to lay off workers or get rid of poor-performing units or investments, so they won't mar the next financial report. "That's been going on for 50 years," Siegel says.

However, a more critical view was expressed in the article by three other Wharton Prof's, Richard Herring, Brian Bushee and Franklin Allen, who alleged, respectively, that mispresentation, circumvention, and/or deception took place with respect to the role of the staff of Lehman and/or its auditors.

Another important point is that one would assume sophisticated parties (at a minimum, analysts, regulators and examiners, and possibly sophisticated investors) would pay as much or more attention to average ratios (i.e., average ratio for the quarter or year), and not solely on quarter-end or year-end ratios, although certain metrics are defined at period-end, in terms of examining the health of an institution, i.e. to account for any 'window dressing' factor. Among the disclosures specifically requested in the SEC's 'Dear CFO' letter, for example, are certain average quarterly balances for the past three years.

Regarding the questions identified in the Lehman examiner's report about 'Repo 105,' I believe the ultimate judgment - not necessarily in the court of public opinion, but in the court of law (although I speak as a non-lawyer on this) is that the judgement will turn on two matters: (1) whether the 'accounting' or recognition and measurement of Repo 105 was proper, i.e. 'in accordance with GAAP,' and (2) whether the disclosures, including MD&A and other disclosures, were sufficient, i.e. in accordance with GAAP and SEC rules. Looking ahead, there may be changes to accounting rules (although there have already been major changes to GAAP since the fall of Lehman, among the new standards issued by FASB over the past year), but I'd say its more likely that there may be changes in SEC disclosure rules or other regulatory capital or disclosure rules building on the SEC's 'Dear CFO' letter. The April 20 Congressional hearing may shed some light on this issue.

FASB Prepares Proposals On Disclosure of Loss Contingencies, More

Following are highlights from yesterday's FASB board meeting, at which the board discussed several proposals slated for release for public comment this quarter, including a revision to a controversial Exposure Draft released a couple of years ago on Disclosure of Certain Loss Contingencies. At yesterday's board meeting:

1. SEC Staff Announcement on: “Accounting for the Health Care and Educational Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act.”
a. The announcement addresses in particular questions related to the fact that there were two different signing dates associated with the two related acts (March 23 and March 30, respectively), and a limited number of companies may have year-ends that fall between the two dates.
b. As background: SEC Staff Announcements are made from time to time at FASB Emerging Issues Task Force meetings, in this case, due to the nature and timing of the issue, the Chairman of the EITF made the announcement at the FASB board meeting, on behalf of the SEC staff.

2. Disclosure About Certain Loss Contingencies:
a. A revised Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment second quarter, 2010 for a 30-day comment period.
b. Effective date of final standard: The proposed effective date would be fiscal years ending on or after Dec. 15, 2010 and interim and annual periods in subsequent fiscal years (see below for nonpublic entities). See FASB’s Summary of Board Decisions for details of decisions reached at yesterday’s meeting about quantitative and qualitative disclosures that would be required.
c. Nonpublic entities:
o Nonpublic entities would not be required to provide the proposed tabular reconciliation of accrued contingencies.
o The effective date of the final standard for nonpublic entities would be the first annual period beginning after December 15, 2010, and for interim periods of fiscal years subsequent to the first annual period.

NOTE - 'My two cents' (I remind you of the disclaimer posted in the right margin of this blog): FASB has done extensive outreach (including, in addition to reviewing comment letters on the earlier proposal, conducting a public roundtable, and inviting participants in field tests). But will the revised Exposure Draft on Disclosure of Certain Loss Contingencies address the concerns voiced by attorneys, preparers (financial executives), and others? As noted in some previous blog posts, even some of the more recent proposals floated at a FASB roundtable last year were not necessarily roundly or resoundingly concurred with, particularly by members of the bar; see our previous blog posts on this topic, here, here, here and here.

See also Broc Romanek's post in blog today, in which he notes:

[A]ttorneys in particular have expressed significant concerns that the proposed mandated disclosures could result in admissions against the interests of companies as well as result in waivers of the attorney-client privilege and attorney work product protection... Because of the comments received, the FASB decided in September 2008 to "re-deliberate" the issues raised by the proposal.

...[T]he FASB now has reached many decisions on this proposal - and plans to issue a new Exposure Draft sometime in May with only a 30-day comment period. Based on the notes, it appears that the concerns expressed by lawyers in the comment letters have not been fully addressed - but we will have to see the Exposure Draft to determine if that truly is the case (eg. requirement to make disclosures about certain remote contingencies under certain circumstances).
3. Disclosures about an employer's participation in a multiemployer plan.
a. An Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment second quarter, 2010, for a 60-day comment period.
b. The proposed effective date would be fiscal years ending after Dec. 15, 2010 (see below for nonpublic entities).
c. See FASB’s Summary of Board Decisions for details of decisions reached at the meeting about quantitative and qualitative disclosures that would be required.
d. Nonpublic entities: the proposed effective date would be the first annual period beginning after December 15, 2010.

4. Insurance contracts
a. The Board tentatively decided not to change the accounting for an insurer’s assets in this project, and decided not to permit or require the use of other comprehensive income for insurance contracts.
b. According to FASB’s Insurance Contracts project summary, an exposure draft of a proposed Accounting Standards Update is expected to be released for public comment in April, 2010.

5. Statement of Comprehensive Income
a. The board decided that in its upcoming proposed Accounting Standards Update:
1. to require full retrospective application,
2. Not to require any transition disclosures, and
3. To permit early adoption.
b. According to FASB’s project summary, an Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment in tandem with the Exposure Draft of the Financial Instruments project, originally slated for release in March, now slated for release second quarter 2010.

Refer to FASB’s Summary of Board Decisions for details on the above matters.

Tuesday, April 6, 2010

PCAOB Forms Fraud Resource Center, Seeks Director

Earlier today, the Public Company Accounting Oversight Board announced that, following on a recommendation made in the 2008 report of the U.S. Treasury Department's Advisory Committee on the Auditing Profession (ACAP), the PCAOB is forming a Financial Reporting Fraud Resource Center. In connection with forming the center, the PCAOB is seeking to hire a Director of the center. See the PCAOB's press release and the related job posting. For background on ACAP, see our Sept. 28, 2008 FEI blog post.

Agenda, Background Materials Posted For Inaugural Meeting of Blue Ribbon Panel on Private Co. Accounting

In advance of the April 12 inaugural meeting of the Blue Ribbon Panel on Private Co. Accounting, the Financial Accounting Foundation (parent of the FASB) has posted the meeting agenda and background materials. The Blue Ribbon Panel is jointly sponsored by the FAF, the AICPA, and the National Association of State Boards of Accountancy.

Among the items listed in the background/reference materials is a report published by FEI's research affiliate - the Financial Executives Research Foundation - in 1996, entitled, "What Do Users of Private Company Financial Statements Want?" A number of FEI members are among those appointed to the Blue Ribbon Panel (members serve in their personal capacity), including Daryl Buck, vice chair of FEI's Committee on Private Companies-Standards. Buck previously served on the FASB-AICPA Private Company Financial Reporting Committee (PCFRC).

See the list of Blue Ribbon Panel members, upcoming meeting dates, and the Blue Ribbon Panel homepage.

For further background, see also our earlier blog posts relating to the Blue Ribbon Panel and private company accounting generally, including:

Friday, April 2, 2010

PCAOB Seeks Comment On Audit Committee Proposal; SAG Meets Next Week

The Public Company Accounting Oversight Board has sprung into Spring with the release earlier this week of a Proposed Auditing Standard on Communication With Audit Committees (press release; Proposed Standard -rulemaking docket #30) on which the public comment period ends May 28. Auditors, financial executives, audit committee members, investors and others may wish to comment on the proposal.

Separately, the PCAOB's Standing Advisory Group is slated to meet next week. The one-and-a-half day SAG meeting, set to take place on April 7-8, will be webcast, and the agenda includes:
  • Responsibilities of the Principal Auditor
  • Auditor's Reporting Model. This discussion will include presentation by a panel of information relating to the history and evolution of the U.S. standard auditor's report and recommendations for changes to that report made by the U.S. Treasury Advisory Committee on the Auditing Profession (ACAP) in 2008. After the panelists' remarks, SAG members and observers will form break-out sessions to discuss potential ways to: (a) change the standard auditor's report and (b) clarify in the auditor's report the auditor's role in detecting fraud. On the second day of the meeting, PCAOB staff will present a summary of the break-out group discussions, and SAG members will have an opportunity to provide additional commentary.
  • Update on Office of Chief Auditor Standard-Setting Activities and Emerging Issues
  • Update on ACAP Recommendations
  • Proposed Auditing Standard on Risk Assessment – Summary of Comments Received
My two cents (I remind you of the disclaimer on the right side of this blog): The SAG is one of my favorite advisory groups to listen to (e.g. webcasts), in large part because of the diversity of constituent groups represented by SAG members, and the high level of expertise of SAG members, particulary when individual SAG members speak openly and frankly on behalf of their constituents (auditors, investors, financial executives, audit committee members, etc.)In such an atmosphere, and with that group of participants, I believe SAG meetings can contain an exceptionally healthy dialogue, of value not only to the PCAOB, but also with respect to corollary accounting and regulatory issues being addressed by the SEC, FASB, AICPA and others, since auditing financial statements, issuing audited financial statements, or analyzing/understanding audited financial statements, does not take place in a vacuum.