I’m In Congress! Foreclosure Review Work Cited By CongressmanBy Francine • Apr 13th, 2012 • Category: The Big 4 And Consulting
A column I wrote for American Banker on March 5, 2012, “What Little We Know About Foreclosure Reviews Is Troubling”, was mentioned during the recent House Financial Services Subcommittee hearing on issues facing the accounting and auditing industry, “Accounting and Auditing Oversight: Pending Proposals and Emerging Issues Confronting Regulators, Standard Setters and the Economy.”
The good news: regulators are pulling back the curtain on the consultants that the big mortgage servicers hired, under orders from the agencies, to review their foreclosure processes.
The bad news: what’s been revealed isn’t pretty.
Why, you might ask, did Congressman Brad Miller of North Carolina ask PCAOB Chairman Jim Doty and SEC Chief Accountant Jim Kroeker about my column? You thought I left town after the PCAOB two-day hearings on auditor independence and auditor rotation!
Not so fast! Congressman Miller wanted to know if they knew about Deloitte’s assignment to review their own work at JP Morgan Chase.
The Deloitte partner in charge of the JPMorgan engagement, Ann Kenyon, was a partner on Deloitte’s audit of Washington Mutual. So it would not be in her interest for Deloitte’s consultants to turn up any auditing errors the firm made with that mortgage originator, particularly since Deloitte is a defendant in shareholder litigation related to Washington Mutual’s collapse. In addition, Deloitte audited Bear Stearns, and is going to trial as a defendant in Bear Stearns investor litigation related, in large part, to EMC. So the consultants wouldn’t have a strong incentive to find any auditing goofs there, either.
If that’s not enough conflict to disqualify a firm, I don’t know what is.
Doty seemed a little surprised to hear my name and Kroeker said that it’s not his job. Not good answers. (I’ve whispered in both sets of ears since to try to help them recover from what I think is a big problem – the perception they left that the consulting side of the audit firms is unregulated.)
You can listen for yourself here. My name and my work is mentioned starting at the 1:14:00 mark.