Henry Keizer is the global head of audit for KPMG International and U.S. vice chair of audit for KPMG LLP. He also is a member of the AICPA board of directors. He spoke with JofA Publisher and Editor-in-Chief Joanne Fiore following the AICPA's board of directors meeting in August and in a follow-up e-mail interview. The following are excerpts from those conversations:
JofA: What were the top challenges you faced this past year and how did you meet them?
Keizer: Most of the top challenges I've faced fall under the umbrella of the economic crisis. To begin, the truly amazing speed of the deterioration of the economy and major corporations was a challenge for everyone. With markets evolving quarter to quarter, this often led to reassessments of and modifications to valuation approaches based on the new facts and circumstances, or on guidance from FASB and the SEC.
Another significant challenge was determining reasonable and informed judgments given the circumstances, and developing an understanding of the factors and market characteristics that were impacting asset valuations. These--and other factors---result ed in more expansive discussions among auditors and our clients ... and I can tell you we've been working very closely with all parties involved in the auditing process--management, audit committees, outside constituencies and regulators--to really review and evaluate these complex issues, some of which had little or no precedent. We've had to work through some thorny questions, like how do you value complex securities in an illiquid market? How do you ensure the right judgments are being made when markets are behaving in ways seldom seen before?
As we looked at those challenges, we also needed to study the changing risk profile of our clients. How would we evolve our audits to respond to the economic crisis that was being presented? It required us to move information through our network of member firms at a far greater pace than we had ever done before.
JofA: You mentioned information dissemination in response to the economic crisis. Did you set up new systems or have new approaches?
Keizer: We use a variety of different means to cascade information through KPMG's member firms. For example, we set up weekly global conference calls in our financial services line of business to allow individuals to hear about the issues that were affecting engagement teams and clients and what the response was to those issues. We also set up mechanisms for teams to escalate issues within their country leadership, so the appropriate resources from a national level could be brought in to assist engagement teams, arrive at appropriate conclusions and analyze the information, making sure the most current knowledge was brought to bear.
We also took a look at the use of specialist resources on engagement teams, particularly in the valuation area. We also encouraged more proactive dialogue among our clients, engagement teams and specialist resources to enhance our overall understanding of circumstances impacting the financial markets, and the performance of specific instruments within such markets.
JofA: What's been the most difficult aspect of the financial crisis?
Keizer: I think the most difficult aspect for auditors was dealing with rapidly changing financial markets and assessing the commensurate impact on asset valuations. …