Comments on: Warning Signs: I Started Looking And The Bubble Burst…

By: re: The Auditors » Blog Archive » Auditors Say Jump… New “Appeals” Process Will Impede Timely PCAOB Inspection Reports

Tue, 03 Aug 2010 19:58:23 +0000

[...] at least two cases where I’ve seen adequate identification and warning of poor audit processes: American Home and Huron Consulting. Slow issuance of the inspection reports, the lack of transparency caused by [...]

By: re: The Auditors » Blog Archive » Ernst & Young and Lehman Brothers: A Summary of Quotes, Stories and Links

Sun, 21 Mar 2010 18:27:29 +0000

[...] published several stories since 2007 on the mortgage originators that failed or were taken over and the lawsuits against their [...]

By: re: The Auditors » Blog Archive » So Much Auditor Litigation Makes For Strange Bedfellows

Tue, 29 Dec 2009 16:49:29 +0000

[...] Every one of the Big 4 (and the next tier) has a handful of lawsuits on their desk related to their audits of the banks and other financial institutions that failed, were taken over in the dead of night, or bailed out by their respective central banks. That’s in addition to the various fraud and Madoff related suits. It may or may not have been better for them to have warned us with “going concern” opinions earlier. We’ll let the judges and juries decide, if any of the cases are actually tried. Most often they settle and the audit firm pays, but not as much as you would think. [...]

By: Tony Rezko

Tony Rezko — Tue, 15 Sep 2009 17:54:18 +0000

There are some other warning signs you shouldn’t miss, that the Big Four will miss, when we bounce back.

Bernanke says the recession is likely over, according to a story today. Take that as you will, but in any case, I predict another 18 months will pass before the Big Four catches up to the news. A few other things will happen in those 18 months:

1) Next fall (2010), when bonus checks clear, you’ll see a mass exodus for companies willing to actually pay their talent. If you think you’re doing more for less, wait until FY11.

2) Every month until then, we’ll see articles on our company website about the “challenges we face,” and an “attaboy” for all the great work we’re doing, blah, blah.

3) More audits will be messed up, but we’ll still have that super high success rate some find so relevant.

4) We’ll be admonished by some B4 apologists that “the firm exists to make a profit,” ignoring a fact that the companies poaching our talent (see #1) are also in it for the money, and are better at exploiting the less than savvy Big Four partners.

By: Time Served

Time Served — Thu, 10 Sep 2009 19:33:33 +0000

I saw this stuff while reviewing loan applications in 2004/2005. I was doing consulting work on loan documentation verification and just could not believe the applications that were approved. 80%+ of the apps we reviewed originated in CA, and people were getting I/O loans on 600k houses with 50k incomes. Taking out a second mortgage on the downpayment and closing costs, essentially putting nothing down on a half million dollar home. They were taking out second mortgages to buy cars, boats, go on trips, etc. These intentions were CLEARLY stated on their applications. I could not believe these were being approved. Yet they had been and more kept coming in. Even as a newly minted college grad I knew there was no way to sustain this. These people were playing with fire on these I/O loans, and it caught up to all of us. But these lenders paid the big fees to the big 4, so it was easy to issue that clean opinion. after all, an auditor isn’t a forecaster, who knows what the future will bring? will the housing bubble last forever? probably not. but they could “reasonably” assume it would continue for another year, and as long as those engagement fees are padding my K-1 those reserves look OK from 50,000 feet. the intent of GC statements is obvious and noble, but no one wants to tell the guy bleeding out he’s not going to make it. Of course the big 4 were more concerned about fees, not feelings. a GC opinion could lose you an account, and any of the other big 3 would probably be more than willing to hop in and issue a clean one if it doesn’t smell too bad. in all of this stockholders/bagholders are simply casualties of war.

By: In the company of Cassandra | called2account

In the company of Cassandra | called2account — Wed, 09 Sep 2009 09:14:48 +0000

[...] the meantime, people like Richard, Francine, myself and Adrienne will keep plugging away at the issues – even if that means we individually [...]

By: Tax Research UK » In the company of Cassandra

Tax Research UK » In the company of Cassandra — Wed, 09 Sep 2009 07:45:34 +0000

[...] the meantime, people like Richard, Francine, myself and Adrienne will keep plugging away at the issues – even if that means we individually [...]

By: The Cassandra effect | AccMan

The Cassandra effect | AccMan — Wed, 09 Sep 2009 01:15:32 +0000

[...] in reading Francine McKenna’s post about the crisis where she enumerated the years over which she has been talking about subprime. I look back over my own posts on the topic and especially about the parlous state of the [...]

By: Dennis Howlett

Dennis Howlett — Mon, 07 Sep 2009 14:29:12 +0000

Francine’s post encouraged me to search through my own posts on this kind of crap. They go back several years as well. Isn’t the REAL sadness in all this that despite Francine (I and others) have been calling out the various actors for some considerable time that no REAL sanctions have been taken other than the odd slap across the wrist or the imposition of paltry fines? WTF is it going to take to get the boneheads round at PCAOB/SEC to up their game?

By: Anonymous

Anonymous — Sun, 06 Sep 2009 23:03:26 +0000

I know a discussion on greed wasn’t the intent of the post, but to me it is the fundamental philisophical reason behind the current crisis. Technically, one can point to the derivative markets and the sub-prim melt-down, but unchecked greed is really the reason we’re here.

I can only speak from an Islamic perspective, but in our tradition greed has been defined and it is unquestionably bad. It can be broadly defined in 2 ways:

1) Acquiring things (can be wealth, cars, etc) in an unlawful manner or without any regard to the consequences on others (i.e. drug dealers, Bernie Madoff) or society in general.
2) Being stingy with ones wealth and not using it to benefit anyone but one’s self.

Greed can be a selfish excessive or uncontrolled desire for possession or pursuit of money, wealth, food, or other possessions, especially when this denies the same goods to others.

So if a person acquires wealth in a decent manner, without harming others, and decides to by a 7 series BMW and a mansion, this does not make him greedy. A partner at an audit firm, however, who decides to look the other way because he doesn’t want to upset management thereby potentially losing the account and putting his personal wealth at risk is greedy. This is because he is putting his personal benefit over that of the shareholder’s and others whose interests he is supposed to protect.

And I agree with Tony, it is not a given that we are all greedy and it is a sad world view that would deem this to be true.

I’m sure if you ask your local priest he may tell you similarly.