Bloomberg Law reports Watergate-era Audit Fraud Rules Face Post-Wells Fargo Revamp

Years after Wells Fargo & Co. and Volkswagen AG shelled out billions to settle federal fraud allegations, investors are still eager for tougher rules that would make auditors weigh the financial toll of deceiving customers and regulators.

The end appears in sight. The US audit board has pledged to modernize requirements dating back decades that spell out how auditors should consider the risk that public company clients violated a law or regulation when vetting their earnings and balance sheets.

Investors want the changes to shed more light on corporate crimes. Accountants and lawyers, meanwhile, say the audit requirements should reflect modern governance practices like ethics hotlines and risk assessments—safety nets that didn’t exist in the 1980s when the rule was written.

“They are more important than ever,” said Steven Richards, a former auditor and now senior managing director with Ankura Consulting Group, of the board’s rules for vetting possible crimes that auditors come across in the course of their work. But those rules haven’t kept up with how businesses operate, nor investors’ higher expectations of auditors, he said.