BF Borgers Collapse Reveals Uncomfortable Truth About Accounting
After the 2008 financial collapse, a Treasury Department report offered dozens of ways to improve the auditing profession. More than two decades later, and in the aftermath of the BF Borgers CPA collapse, I find myself questioning whether anything has truly changed.
When will we—the CPA firms, along with standard-setters, regulators, membership organizations, and buyers of audit services—confront the sobering truths our profession’s own numbers tell?
BF Borgers’ downfall inadvertently brings to light hidden figures that expose the darker truths of public accounting. It also underscores an overemphasis on price as the primary competitive edge among audit firms.
BF Borgers became the one of the largest audit firms in the US by number of clients, focusing on smaller reporting companies that benefited from its low audit fees. The firm increased its number of issuer clients from 80 in 2019 to 173 as of January, with CEO Ben Borgers responsible for 141 issuer filings in one year alone.
The Securities and Exchange Commission in May accused BF Borgers of selling fraudulent audits that fell well short of auditing standards set by the Public Company Accounting Oversight Board. While the firm shut down its public practice and agreed to pay $14 million in penalties, the question remains how these penalties compare to the profits that were derived.
Profit Pressures
The financial pressures from price competition have created a toxic work environment within many audit firms. The pursuit of profitability compels firms to maximize audit opportunities with minimal staffing levels. Partners, driven by client retention and profit per partner, cut corners and costs at the expense of audit quality. Overworked auditors face accelerated deadlines, high turnover rates, and stagnant salaries.
PwC’s fiscal 2023 audit quality report shows that audit associates logged an average of 194 hours of overtime annually, senior associates worked 223 hours, and audit partners and managing directors logged 356 hours. One regional firm reported 816 hours of overtime for its staff.
PCAOB disciplinary orders against Marcum in 2023 and Withum in 2024 revealed concerning partner utilization rates and excessive workloads. In Marcum’s case, one partner oversaw 75 issuer clients, while another engagement quality reviewer was tasked with reviewing the work of 118 issuer clients.
The PCAOB sanction against Withum uncovered similar findings, including one engagement partner with a monthly utilization rate of 220% who worked approximately 100 hours per week for two consecutive weeks.
Oversight Concerns
Despite its $14 million penalty and ban from public practice, BF Borgers’ website continues to be active, prominently touting its technical expertise, financial knowledge, and commitment to excellence. This raises concerns about the timeliness and impact of regulatory oversight and professional accountability.
PCAOB inspections and disciplinary orders often face significant delays in their public release, diminishing their relevance. For example, Big Four inspection reports issued by the PCAOB in late 2023 relate to audits conducted in 2022 for issuers with fiscal years generally ending in 2021. This delay underscores the challenge of ensuring timely oversight.
While recent PCAOB initiatives indicate progress, such as the new quality control standard known as QC 1000 and proposals on firm and engagement metrics, their slow implementation risks allowing audit firms to evade scrutiny and perpetuate systemic issues dating back to the beginning of my career and likely beyond.
Can’t Keep Up
These very regulators, often slow to enforce, continue demanding more from financial statement preparers and auditors. The frequent introduction of new standards undoubtedly strains audit firms who simply can’t keep up and end up diverting attention from critical audit quality initiatives.
The PCAOB initially adopted American Institute of Certified Public Accountants standards on an interim basis and subsequently has introduced numerous unique standards of its own. Meanwhile, the Financial Accounting Standards Board has issued over 140 accounting standards updates in just the past 10 years.
This regulatory saturation complicates compliance and detracts from addressing fundamental issues affecting audit quality. And the SEC’s decision to shorten filing timelines to just 60 days for certain filers may contribute to rushed audits, potentially compromising quality.
All stakeholders—regulatory bodies, audit firms, and their clients—must shoulder the burden for the sad state of the auditing profession. Few are willing to acknowledge their role in perpetuating systemic flaws, yet the numbers tell a different story of shared accountability. We have to follow the numbers to find the truth about public accounting.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Chris Vanover is president of audit advisory firm CPA Club and former assistant director of the Public Company Accounting Oversight Board.
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