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Sarbanes-Oxley News & Developments
The Coming Changes In Ad Agency AccountingNew PCAOB Chief Wants More Accurate Disclosure of Ad Spending
> > Douglas Carmichael, the new auditor for the accounting profession, wants to see better disclosure of corporate Americas ad spending, including an end to the practice employed at some companies of using estimated rather than actual ad expenses in calculating quarterly earnings.
Mr. Carmichael, a frequent critic of lax accounting, starts in May as chief auditor of the new Public Company Accounting Oversight Board. We want to see standards that are in the public interest said Mr. Carmichael. We want to make it clear that the auditors role is to protect the investor, that the investor is the primary stakeholder.
A 1993 regulation requires companies to disclose actual ad expenses annually, but a 1970s rule still allows them to estimate the expenses each quarter, which Mr. Carmichael said leaves open the possibility a company could manipulate the expense line to smooth quarterly earnings. While fixing the quarterly ad expense issue is not a high priority, -its a good example- of longer term issues that should be addressed said Mr. Carmichael.
Mr. Carmichael is no fan of advertising done by the accounting firms he now gets to regulate. The importance of advertising in the economy was to get your real message across, not to fool people, he said, noting that the messages in some ads run counter to the professions recent missteps and efforts by some fight new industry regulation.
Mr. Carmichael said -accounting firms talk the talk, but they do not walk the walk. Many firms are saying the right thing in their ads, but I have not seen the follow-through in that they are actually doing it.-
Source: AdAge article by Bradley Johnson dated April 28, 2003
Published:2003-04-29
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