This presentation extended the discussion I started in my recent post on Section 10A of the Securities and Exchange Act of 1934.

For previous years’ presentations on “The Skeptical Professional,” go here and here.

There were some great presentations, including:

Brian Grow from Reuters presented their multi-part series “Shell Games”.  This series and the journalists who worked on it were recently named as finalists for the 2012 UCLA Gerald Loeb Awards for Business Journalism.  Articles in this series explore the extent and impact of corporate secrecy in the United States, in particular the use and abuse of shell corporations. The last article about Chesapeake’s Aubrey McClendon in December led to a much broader investigation of Chesapeake Energy and McClendon. I was quoted in the first in that series just recently.

I was thrilled to hear Marjorie Maguire-Krupp talk about Satyam in her very thorough discussion, “Riding a Tiger and Not Knowing How to Get Off”: Lessons Learned from the Satyam Fraud.” The presentation was co-written by Sridhar Ramamoorti, an old friend from Chicago and The IIA who is now teaching at Kennesaw State University.

Joe Koletar, a retired FBI guy keynoted about the psychology of fraud.  I took a lot of notes.

Pat Huddleston is CEO of a firm called Investor Watchdog LLC and he gave a talk with lots of references to resources for investing due diligence.

“I’m no hologram,” I told him.

Want to see for yourself?

Here are a few opportunities coming up in New York and Chicago in the next two weeks.

March 29th, 2012, Social Media in the Trading Room, The Securities Traders Association of New York 76th Annual Conference and Dinner. Panelist with Rob Passarella, MD of Institutional Markets for Dow Jones, Josh Brown of Fusion Analytics and the Reformed Broker blog and moderated by Dominic Chu of Bloomberg TV.

March 30-31, 2012, SEC Whistleblower Program, Panel discussion at the Forensic and Investigative Accounting Section Mid-Year Meeting of the American Accounting Association in Chicago.

April 4, 2012, CFA Chicago, Step Up Your Due Diligence for the New Environment with Michelle Leder of Morningstar, Inc. author of the blog Footnoted.com.

¡Nos vemos!

March 29th, 2012, Social Media in the Trading Room, The Securities Traders Association of New York 76th Annual Conference and Dinner. Panelist with Rob Passarella, MD of Institutional Markets for Dow Jones, Josh Brown of Fusion Analytics and the Reformed Broker blog and moderated by Dominic Chu of Bloomberg TV.

March 30-31, 2012, SEC Whistleblower Program, Panel discussion at the Forensic and Investigative Accounting Section Mid-Year Meeting of the American Accounting Association in Chicago.

April 4, 2012, CFA Chicago, Step Up Your Due Diligence for the New Environment with Michelle Leder of Morningstar, Inc. author of the blog Footnoted.com.

May 15, 2012, back for my third year presenting to the Georgia Southern University Fraud and Forensic Accounting Conference, Savannah, GA. My presentation:  Auditors as “Whistleblowers”: The Auditors’ Responsibility to Report Fraud and Illegal Acts.

May 17, 2012, The Committee for Monetary Research and Education Annual Dinner. My Topic: The Mystery of MF Global:  How Hot Money and Hubris Caused The Loss of $1.6 Billion in Customer Funds

June 4-6, 2012, supporting the Compliance Week Annual Conference, Washington, DC.

July 8-11, 2012, covering The Institute of Internal Auditors 2012 Annual Conference, Boston Massachusetts.

Previous speeches:

I was on TV Saturday February 10 talking about MF Global!  My segment starts at the 13:00 minute mark.

March 6-7, 2012, Eastern Illinois University. My speech to a large group of students, faculty and visitors in the afternoon was entitled, Who Will Slay The Dragon? Penn State and College Football: How “Ethical” Institutions Have Dropped Their Swords and Shields.  The evening presentation to MBAs was, Stay on your feet. How “new hires” can successfully negotiate the slippery ethical slopes of the workplace.

February 6, 2012, presented “Modeling Fraud: Models Behaving Nefariously”, for the Columbia University Financial Engineering Practitioners Seminar, New York, NY. Here’s the presentation.

Don’t forget to read my column at Forbes each week,  “Accounting Watchdog”, and my column in American Banker, “Accountable”, every Friday online and Mondays in print.

For more information about previous speaking engagements and links to presentations and videos, go to my Speaking page.

If you have a media request or would like me to speak or create specialized training content for your conference, event, firm, or university, please contact me at fmckenna [at] mckennapartners.com.

I first met Professor Tim Louwers, my host, at the American Accounting Association (AAA) Public Interest Meeting in Chicago last March. He is President of the Fraud and Investigative Accounting (FIA) Section of the AAA. (I’ll be speaking on a panel this March 30 at the midyear meeting of the AAA FIA, also to be held in Chicago.)

Professor Louwers and Professor Sandy Cereola took me out for dinner to the wonderful Joshua Wilton House.  If you are ever in the Shenandoah Valley near Harrisonburg I high recommend it.

Professor Paul Copley, the Department Head for School of Accounting as well as several other faculty were kind enough to share their research and their feedback on my writing with me. James Madison University School of Accounting offers a Bachelor of Business Administration (B.B.A.) degree and a Master of Science (M.S.) degree in accounting.  Most students choose to receive both degrees and thereby satisfy the 150 semester hours of education required in most states to be eligible to sit for the CPA exam.  It seems that this is a significant trend – obtaining a Masters in Accounting to meet 150 hour requirements rather than lengthening the undergraduate degree.

According to the 2011 National Association of State Boards of Accountancy report, the 2010 edition of Candidate Performance on the Uniform CPA Examination ranked JMU as the No. 1 school with the top overall pass rate for first-time candidates with an advanced degree. The report covers testing information collected for the 2010 calendar year and details examination candidate performance from nearly 2,000 colleges and universities. To see how JMU compares to other schools, visit http://bit.ly/tGIwrA.

I spoke to both students and faculty about the advantages and disadvantages of this strategy for students and schools, especially in light of the overtime lawsuits against the Big Four audit firms.

Here’s the text of my speech to the Beta Alpha Psi initiates.  If you would like me to speak at your school, please contact me at fmckenna@mckennapartners.com

Good evening.

Thank you so much to Professor Louwers, Professor Cereola and James Madison University for asking me to speak. It’s enormously rewarding to me to be here amongst accounting students and accounting educators.

I’ve worked a lot of different places over the years and I’m no different than you in finding the world we live in a constant professional challenge.

I think you will face more than one ethical dilemma during the first year of your career at a large public accounting firm, corporation, or in a government office. In public accounting firms, which are my primary focus, the land mines are everywhere.

You may have to decide whether to check a box for a test or review that wasn’t done. You may be asked to create or backdate a workpaper, add evidence of reviews and signoffs, insert documents after the fact, or change conclusions or recreate analyses in preparation for a quality review or PCAOB inspection.

Rule of thumb:  If a partner or manager uses the word “backdate” it’s pretty certain he or she wants you to do something you may be famous for later – and not in the good way.  If you hear the word “backdate”, run as fast as you can in the other direction to your firm’s Ethics Hotline.

You may be pressured to falsify the timesheet to stay under budget for your part of the engagement. That’s called “eating hours” or sticking to the budget.

You may see something and want to say something.

Will you? Should you?  Can you?

Some of will make the difficult decisions to speak up. Some will go along to get along. Keeping your head down and your mouth shut is self-interest and career survival. The pressure to succeed, to make those in your life proud, to maintain physical, financial and job security can chip away, day after day, at your self-esteem as professionals and your ethical resolve.

So, what are the standards accounting professionals must acknowledge and adhere to?

First, let’s differentiate between an “accounting professional” and the accounting or audit industry where many professionals practice.

Those of you who are CPAs and teach can attest that I’m talking about two different things. Accounting professionals work in industry, government, politics, journalism, academia, and other vocations in addition to public accounting firms – the accounting industry.

What does it mean to be an “accounting professional”?

The AICPA Section 50 Principles of Professional Conduct starts out:

• By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations.
• The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.
• A distinguishing mark of a profession is acceptance of its responsibility to the public.

There’s more but that’s the gist of it.  If you work in client service, if you are a CPA, your first obligation as a professional is to your client – not your firm, your partners, or even your family.

If your client is doing something illegal, then your obligation shifts to society and to law enforcement. That may seem harsh, but it’s the code that’s supposed to insure that lawyers and accountants, for example don’t cut corners out of their own self-interest and to the detriment of their client’s interests.

Martin Luther King Jr. said “Morality cannot be legislated, but behavior can be regulated. Judicial decrees may not change the heart, but they can restrain the heartless.”

Regulate bad behavior. Restrain the heartless.

The audit model is intended to provide a critical public service meant to protect shareholders (the purpose of the audit report). It’s done via a profit making private partnership that can encourage “behavior that must be regulated”. In the United States, that’s the job the PCAOB was charged to do after Sarbanes-Oxley.

Many of you will go to to work for public accounting firms. In the United States, certified public accountants are the only authorized non-governmental type of external auditors who may perform audits of financial statements and provide reports of those audits for public review, submission to the SEC, and to comply with exchange listing standards.

In the United States, the firms and their state-certified, licensed professionals are also required to be independent of the entities being audited.

Public accounting is an industry that employs many accounting professionals, as well as lawyers and other professionals. Each group has its own set of standards and a code of ethics. As a regulated industry, all employees of public accounting firms have an obligation to behave within laws and standards governing that industry that are intended to protect investors and serve the public’s interest.

Look at the four largest global public accounting firms. They officially operate as a loose confederation of separate private partnerships for legal reasons and to insure secrecy, but their size and complexity makes them look more like corporations to the outsider.  They manage by consensus, but in reality a limited number of partners lead the firm and make decisions on behalf of thousands of “partners” who are more like highly paid executives.

The top four firms – Deloitte, Ernst & Young, PwC, and KPMG – generate more than $100 billion in total revenues globally and employ more than 600 thousand people. As auditors and advisors, they work inside the banks, brokerage firms, auto manufacturers, mortgage brokers, and homebuilders.

Here’s an example:

KPMG audits Citigroup, Wells Fargo – who now owns client Wachovia – GE, and GM.  They used to audit two big mortgage originators before they blew up – Countrywide and New Century. They also used to audit Fannie Mae and Moody’s before they were fired and sued. They also audit the US Treasury.

PricewaterhouseCoopers audits JP Morgan Chase, Bank of America, Goldman Sachs, AIG, the Federal Home Loan Banks, and Freddie Mac. PwC is also responsible for Satyam, Northern Rock in the UK, Glitnir in Iceland, and Russia’s Yukos.

Deloitte, who is now Fannie Mae’s auditor, was also auditor of four other housing related companies that had issues: Taylor Bean & Whitaker, Beazer, Novastar, and American Home. (The bank that TBW bankrupted, Colonial Bank was audited by PwC.) Deloitte audited three no-longer-independent large firms sunk by bad mortgages: Merrill Lynch, Bear Stearns, and Royal Bank of Scotland. Deloitte used to audit Washington Mutual before it was taken over forcibly by JP Morgan. They also audit the Federal Reserve Bank and Buffett’s Berkshire Hathaway.

Ernst & Young, everyone knows, audited Lehman Brothers. They also audit Groupon, Facebook, Google, and Zynga. Don’t forget alleged fraud Sino Forest in Canada. And also UBS and Societe Generale, home of the “rogue” traders, and Anglo Irish in Ireland. EY also audits News Corp of the phone-tapping scandal, and S&P, the ratings agency.

The revenue model of professional services firms is based on hourly rates and that means people. More people equals more billable hours assuming there’s demand, but more fixed expense. If demand goes down or the market contracts as it did when some firms lost clients through failures and acquisitions like Deloitte, they start laying off. And they have less people work more hours. They’re on salary, after all, not hourly. And they replace higher paid professionals with lower paid professionals. They even cut partners.

That’s called the leverage model.

One legal case that demonstrates the leverage model in action is the class action in California, Campbell v Pricewaterhouse, a lawsuit about overtime.

Several overtime lawsuits are pending against some of the major accounting firms doing business in California. These suits were filed by non-CPAs, non-licensed associates (entry level college graduates), who believe they were misclassified under California law as exempt professionals and are due overtime and other benefits due to non-exempt employees.

A few states like California, Wisconsin, and Massachusetts  – and Canada where similar suits were settled with very little notice here – have wage and hour laws that are perceived as more employee-friendly.

I have mixed feelings about these lawsuits. In twenty-five years of working as an accountant, consultant and internal auditor, I have never been paid time and a half. When you choose to work in a profession, you don’t expect it.

Many college graduates, these days, don’t see the point in working eighty hours a week during the busy tax or audit season for a fixed salary. When they calculate their hourly rate, even given the fairly generous salaries, signing bonuses, and benefits the best and brightest get as new Audit Associates, many question the total cost of the sacrifices they’re making.

All they see are strained relationships with family and friends, excessive stressful travel, late nights spent performing mind-numbing “monkey work” on laptops, non-stop scanning and photocopying, fewer partners and opportunities for promotion, and very little use of the ambition and brains they thought they were hired for.

Although the state and federal wage and hour laws governing eligibility for overtime pay are complicated, the public policy issues they present for audit firms are not.

The largest public accounting firms want entry-level accounting graduates to feel like professionals, by virtue of their university degree, the potential to take the Certified Public Accounting (CPA) exam, and their eligibility to be licensed eventually. But when it comes to eligibility for overtime – or rather exemption from overtime – it’s not who you think you are or where you came from but what you actually do that matters most.

The education of accounting majors consists, in the worst case scenario, of being “taught the exam” and, in the best case, of four to five years of head-down, hard-core study and rote memorization of facts with rarely any time for other outside reading, enrichment, travel, or world view development.

If some of these lawsuits are successful, universities that provide their states’ CPA hour requirements without the necessity of a graduate degree may doom their graduates to status as “para-accountants” until licensing.

There’s an economic argument at play here: In this environment more work produced for less pay is both tolerated by labor and a business model that rewards firms with higher profitability.

The goal of today’s Big 4 private partnerships is, primarily to increase partner earnings (total cash compensation, unit values, revenue per partner, etc) and preserve the future of the partnership so partner pension, profit sharing, and other funds upon which retired and retiring partners depend will remain intact (and funded). Everything else – employees, clients, and more often these days integrity – is secondary.

There’s also a practical regulatory issue at stake when the firm uses the leverage model to the extreme: Can the regulators allow audit firms – who play a role as critical regulatory cogs in the financial system wheel – to delegate more judgment and decision making over financial reporting and disclosure to the lowest level of staff because they are the per-hour cheapest?

Individual assimilation and success in a Big 4 public accounting firm starts with selection based on university credentials, referrals from professors, family background, and business ties, as well as having political beliefs and economic philosophies that are aligned with firm values. This process now starts in some universities in freshman year, with some students having two or three internships before they graduate.

For some students it starts even earlier.  One or both parents work for the audit firms and the career is one that has always been considered a safe choice.  That’s especially true if the apple doesn’t fall far from the tree in talents and personality.

Auditors often marry other auditors or accountants because in school or in their early career they have no time to date anyone else!

We’re often furiously trying to join something, enroll others or keep people out. The more exclusive a country club, society or nightclub the more desperate we are to gain entry…

Or avoid being kicked out.

Professional services and, in particular audit and consulting in the Big 4, are not for everyone. Audit is, in my mind, a vocation. So in addition to the client service aspects, which require you to do things on their timeline, based on their needs, given their requirements and your commitments, you are also serving a broader set of interests, shareholders and the capital markets system.

Big job, but somebody does it and it takes, at times, long hours, unpredictable schedules, and long hours. Did I mention long hours? I won’t get into the issue of “face time” and bad budgets, and squeezing more work on less people so you can hoard chargeablity…

For another day. But in general, the nature of professional services is that it has peaks and valleys of activity.

The difference between now and when I first started working for KPMG Consulting in the early 90‘s is that there’s no predictable payoff. When I worked for KPMG Consulting/BearingPoint from roughly 1993-2001 (not necessarily PwC 2005-2006) I felt that if I put the time in, did well, and asked for extra – went the extra mile – I would be rewarded.

I put my name in the hat for not one but two tours of duty in Latin America. I was rewarded as the first female Managing Director in Latin America. I had much more people responsibility and P&L authority than most any other partner/MD in the US except the national leaders.

Nowadays, however, it’s more of a crapshoot. I get email and comments every week from those who did everything right, 150%, only to realize it’s not what you do or what you know, but who you know at the right time, and that sometimes there’s a “what have you done for me lately” mentality that can be demoralizing.

In spite of the fact the firms are doing well in the consulting and tax practices and different practices and some firms are doing better than others, in general, the audit practices are not bringing in the dollars they used to.  That’s due to no more Sarbanes-Oxley windfall and a number of things that put the ball back in the client’s court. At this point, the client controls the relationship and the fee structure, with many clients requiring competitive tenders and fee cuts or more work for the same fee every year.

Does that mean that the experience at a public accounting firm is all bad?  On the contrary.  There’s the training, the chance to work with big companies and very smart people in the firms and at clients and, eventually, the alumni network. But your experience, and what you get out of it, is very dependent on the firm and the people you choose to work with.

I was fortunate to have great mentors, coaches, people who took their job and my career seriously when I was at KPMG and BearingPoint.  At PwC, not so much.  But even at PwC I met very smart people like Richard Chambers who is now CEO of the Institute of Internal Auditors. He and others are still friends and contacts and very supportive of what I have been doing since.  Good people are everywhere.

How do you choose which firm to work for, assuming you have a choice?

Look them in the eye.  Are these people you trust, you can learn from, that you respect?  Do any of them look like the guy or gal or would hit on your boyfriend or girlfriend when you weren’t looking?  People don’t change.  That type in college is that type at work – the one who will tell the manager you screwed up or forgot to staple the stack of documents with two parallel staples in the left hand corner or used the blue pen instead of the green one just so their friend can get the billable hours or hang out on the client site with them instead of you.

Cliques and cabals form in the close knit working environment of the late night team room, when you’re all supposed to be sharing the workload, while eating pizza or Chinese food and swapping life stories.

The firms are managed locally and the strength of the client list, partner personalities, and culture of an individual office is more important to your professional development and future choices in the first five years than any secondment program or diversity program or even which firm it is. They all have great people and they all could go bust with the next big lawsuit for a fraud you didn’t see coming.

Internal operations of the public accounting firms, especially the largest ones, are conducted in a secretive manner. Financial results and common business metrics are minimally disclosed to the outside and on a “need to know” basis even internally. Once initiated into firm culture, survival requires adoption of an informal oath of allegiance that makes it shameful to betray even one’s deadliest enemy, your competitors, to legal and regulatory authorities. It’s a Big 4 type of omertà, the extreme form of loyalty and solidarity in the face of authority usually attributed to the Mafia.

Examples of an extreme sense of loyalty to even those who’ve disgraced the profession can be found when partners that have been sanctioned by the SEC, forbidden to audit public companies, are later reinstated. Deloitte, for example, kept the partners responsible for Delphi and Navistar on their payroll during their SEC suspension and they survived the sanction to audit more public companies.

Many accounting professionals who work for the audit firms write me to ask about their “true client.” They have either never been taught this concept or had it beaten out of them by the reality of which behavior is rewarded at their firms.

The client for audited financial statements is the shareholder, not the company management. The Audit Committee of the Board of Directors hires and is supposed to manage the external auditor. The Audit Committee represents that shareholder client but has a legal duty to the corporation not the shareholder. Other stakeholders include bondholders, lenders, employees, vendors/customers who depend on the continued viability of the company, and regulators (whose role is to protect investors and overall capitalist system.)

When professionals forget or suppress acknowledgement of their true client, an auditor loses the ability to properly structure decisions with moral and ethical implications, let alone those with serious legal and regulatory ones.  In the face of potential legal implications of a decision, they seek to avoid personal liability.  In the face of a moral or ethical dilemma, they look at costs/benefits of looking out for their own financial self-interest, at an individual and at a firm level rather than shareholders’ and society’s interests.

When was the last time you heard about a whistleblower from one of the Big 4 firms?

It’s not easy for an individual external auditor to step up and do the right thing. The model of providing audits, a critical public service meant to protect shareholders via a profit making private partnership, often encourages “behavior that must be regulated.”

I believe auditors demonstrated a profound lack of professional skepticism and professionalism during the crisis. They ignored the possible motives and motivations of their audit subjects.

Rather that assuming executives, and possibly the Board of Directors, are self-centered and human, they accorded them the highest form of deference. In the interest of maintaining financial and social relationships, in my opinion the auditors did not sufficiently challenge and expose the survival instincts and financial incentives of corporate executives and board members. That may be because the firms, paid by management, have their own financial incentives to stay quiet.

Whistleblowers and those that push unpopular ideas or try to report on wrongdoing often lose their jobs, are vilified by the former employers and sometimes their former colleagues, are often disbelieved and laughed at, attributed with bad attributes and intentions such as revenge, anger, payback, whining, mercenary goals, bitterness, spite, Don Quixote-like tilting at windmills, unreasonable idealism, and impractical expectations.

Whistleblowers are often very right, but often end up being right all alone.

Sometimes, when raising concerns or questions about lack of segregation of duties, improper expense reports, lack of proper authorizations for stock options or shady compensation decisions, an external or internal auditor hears the following:

“He’s a man of integrity.  He lives this company. He is a pillar of the community.  He donates to charity.  He is an elder statesman of the industry. He has unquestionable, unassailable ethics and cares about this company.”

Speaking up can be a career-limiting move, threatening your own livelihood in addition to the success of your office, your practice, and your firm.

But auditors, who are inevitably almost always CPAs, have a higher responsibility. Making the type-two error of being right in your suspicions of illegal activity and potentially enormous harm or loss and not acting on them is completely unacceptable.

Don’t let anyone ever tell you again, after Madoff and the rest of the cases of hubris we have seen during this ignominious year, that any man or woman is above suspicion.

Professors: Please teach your students the principle of professional skepticism.

Students:  Never stop questioning authority.

The PCAOB, under the leadership of new Chairman Jim Doty, is raising many of these issues and speaking frankly and consistently about them.

We can wait for regulation to change. But we can also act every day to promote positive change in the profession.  Your attitude, your actions, and your focus on independence and integrity can force change, too.

The price is $3.99.

This book is the third volume of compilations from re: The Auditors and the second in a series on careers. This volume focuses on the role of the partner in the Big Four public accounting firm and how that person is developed, evaluated, and compensated.

All of these essays have been previously published in re: The Auditors but have been selected and arranged chronologically for your convenience. This version does include extensive links to other articles and resources both on and off the site. Please visit the original posts to view reader comments. The community conversation and information sharing is one of the most valuable parts of the re: The Auditors site.

Future career volumes will cover diversity and inclusiveness, ethics, independence, and professional skepticism, layoffs, and the overtime lawsuits.

Future compilations will cover special topics in auditor litigation, the Ernst & Young/Lehman case, consulting in the Big Four, and a behind the scenes look at the global network construct.

Please also visit my columns at Forbes.com, “Accounting Watchdog”, and at American Banker, “Accountable”.

Also available:

re: The Auditors on Careers: A Compilation On Recruiting, Salaries, and the Competitive Employment Landscape

The price is $2.99.

This book is the second in a series of compilations from re: The Auditors and my Forbes column, “Accounting Watchdog”. This volume starts a series on careers for auditors, internal auditors, consultants, and tax professional in the Big Four public accounting firms.

In this e-book I cover the recruiting process, salaries, and the competitive employment landscape of a career in public accounting with one of the large global firms.

And: “Unholy Alliance: PricewaterhouseCoopers And Its Relationship With AIG and Goldman Sachs During The Crisis.”

This is not a traditional book but a compilation of all of my writing from 2007 until January of this year on AIG, Hank Greenberg, the asset valuation and collateral conflict between Goldman Sachs and AIG, and PwC’s relationship with two of its most important clients.

All of the chapters are available as posts on this site and Forbes.com, but I thought it might be helpful for some to see them in chronological order, all together.

The package includes thirty-three (33) essays including extensive links, almost 41,000 words, and 180 pages of stories about such characters as Arthur Levitt, Joe Cassano, Eliot Spitzer, and Hank Greenberg. There’s extensive coverage of the litigation related to the earlier AIG crisis for accounting issues occurring between 2002-2005.

All for $5.99.

I’ve been covering this beat for almost five years now and my experience in the industry goes back almost thirty years. If you’re interested in this business, this insight is not available anywhere else.

So, please let me know what you think.

You can go here to subscribe to this site via Kindle.

Your feedback and ideas for future e-books will be appreciated.

Scott and I go way back. He retired from KPMG in July of 2008 after 33 years of service and held many leadership positions there and in the profession. When I joined the firm in 1993, my first role was as a consultant in the Public Services practice, implementing KPMG’s proprietary financial software for state and local governments. During my tenure with KPMG, (1993 until I joined JP Morgan in Latin America in 1998 and the consulting firm turned into BearingPoint), Scott served as Midwest Leader of the Public Sector Practice.

Scott recently took a spot with the PCAOB Standing Advisory Group and that’s where we reconnected last March.

It was an honor for me to visit to speak to faculty, students in the Masters of Accountancy Program, and student groups.

*************************************************

Here’s a blog post about my feelings towards blogging and financial journalism.

Here’s an interview I did, on Twitter, about how to increase your professional visibility and showcase expertise.

Here’s something I wrote about how I track auditor litigation with limited resources.  Lots of good resources for you.

Here’s a post at Forbes about fraud and accountants.  Can skepticism be taught?

Here’s my “Speaker” page with links, videos and ideas about other speeches I have given and can give.

One of my most popular posts wasn’t even written by me!  “Why Bother Becoming A CPA?” by Roger Phillips of Roger CPA Review.

I have two e-books on the Kindle with more to come.  One is a compilation of articles about a career in the Big 4.

Here’s the text of the speech I gave to the North Carolin State University accounting clubs meeting last Tuesday night.

Good evening.

Thank you so much to Professor Showalter and North Carolina State University for asking me to speak. It’s enormously rewarding to me to be here amongst accounting students and accounting educators.

My mother always thought I would be a teacher. I became an accountant, a CPA, a banker, a manager, an internal auditor, a consultant. Those are all very noble professions. So it’s an honor to be here sharing my thoughts with a group of accounting professionals. Because as much as I am now a writer and speaker, I am still an accountant, with an accountant’s view of the world.

I also consider myself a professional.

I’ve worked a lot of different places over the years and I’m no different than you in finding the world we live in a constant professional challenge.

I think you will face more than one ethical dilemma during the first year of your career at a large public accounting firm, corporation, or government office. In public accounting firms, which are my primary focus, the landmines are everywhere.

You may have to decide whether to check a box for a test or review that wasn’t done.  You may be asked to create or backdate a workpaper to complete a file before a quality review or PCAOB inspection.  You may be pressured to falsify their timesheet to stay under budget for their part of the engagement.

You may see something and want to say something.

Will you? Should you?  Can you?

Some of will make difficult decisions to speak up. Some will go along to get along. Keeping your head down and your mouth shut is self-interest and career survival. The pressure to succeed, to make those in your life proud, to maintain physical, financial and job security can chip away, day after day, at your self-esteem as professionals and your ethical resolve.

I’ve embraced a new profession in the last five years – journalism – that has its own list of ethical standards if you want to survive and be taken seriously. But journalism is a profession with a voluntary set of standards and code of ethics, not the legally required ones we have to adhere to.

So, what are the standards accounting professionals must acknowledge and adhere to?

First, let’s differentiate between an “accounting professional” and the accounting or audit industry where many professionals practice.

Those of you who are CPAs and teach can attest that I’m talking about two different things. Accounting professionals work in industry, government, politics, journalism, academia, and other vocations in addition to public accounting firms.

What does it mean to be an “accounting professional”?

The AICPA Section 50 principles of professional Conduct starts out:

• By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations.
• The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.
• A distinguishing mark of a profession is acceptance of its responsibility to the public.

There’s more but that’s the gist of it.  If you work in client service, if you are a CPA, your first obligation as a professional is to your client – not your firm, your partners, or even your family.

If your client is doing something illegal, then your obligation shifts to society and to law enforcement. That may seem harsh, but it’s the code that’s supposed to insure that lawyers and accountants, for example don’t cut corners out of their own self-interest and to the detriment of their client’s interests.

Many of you will go to to work for public accounting firms. In the United States, certified public accountants are the only authorized non-governmental type of external auditors who may perform audits of financial statements and provide reports of those audits for public review, submission to the SEC, and to comply with exchange listing standards. In the United States, the firms and their state-certified, licensed professionals are also required to be independent of the entities being audited.

Public accounting is an industry that employs many accounting professionals, as well as lawyers and other professionals. Each group has its own set of standards and a code of ethics. As a regulated industry, all employees of public accounting firms have an obligation to behave within laws and standards governing that industry that are intended to protect investors and serve the public’s interest.

Look at the four largest global public accounting firms. They officially operate as a loose confederation of separate private partnerships for legal reasons and to insure secrecy, but their size and complexity makes them look more like corporations to the outsider.  They manage by consensus, but in reality a limited number of partners lead the firm and make decisions on behalf of thousands of “partners” who are more like highly paid executives.

The top four firms – Deloitte, Ernst & Young, PwC, and KPMG – generate more than $100 billion in total revenues globally and employ more than 600 thousand people. As auditors and advisors, they work inside the banks, brokerage firms, auto manufacturers, mortgage brokers, and homebuilders.

Here’s an example:

KPMG audits Citigroup, Wells Fargo – who now owns client Wachovia – GE, and GM.  They used to audit two big mortgage originators before they blew up – Countrywide and New Century. They also used to audit Fannie Mae and Moody’s before they were fired and sued. They also audit the US Treasury.

PricewaterhouseCoopers audits JP Morgan Chase, Bank of America, Goldman Sachs, AIG, the Federal Home Loan Banks, and Freddie Mac. PwC is also responsible for Satyam, Northern Rock in the UK, Glitnir in Iceland, and Russia’s Yukos.

Deloitte, who is now Fannie Mae’s auditor, was also auditor of four other housing related companies that had issues: Taylor Bean & Whitaker, Beazer, Novastar, and American Home. (The bank that TBW bankrupted, Colonial Bank was audited by PwC.) Deloitte audited three no-longer-independent large firms sunk by bad mortgages: Merrill Lynch, Bear Stearns, and Royal Bank of Scotland. Deloitte used to audit Washington Mutual before it was taken over forcibly by JP Morgan. They also audit the Federal Reserve Bank and Buffett’s Berkshire Hathaway.

Ernst & Young, everyone knows, audited Lehman Brothers. But don’t forget UBS and Societe Generale, home of the “rogue” traders, and Anglo Irish in Ireland. EY also audits News Corp and S&P, the ratings agency.

The Big 4 are still at standing at these executives’ right hands. They are also earning more fees helping the US federal government under TARP to organize and control the taxpayers’ new investments in subprime loans, non-liquid assets, and exotic financial instruments.

The public accounting firms make money whether companies thrive or whether they fail. That may sound good for you, as students, and good for you as mentors and coaches encouraging your students to work for the firms.

However, don’t forget the firms actions at the beginning and in the midst of the financial crisis.  They kept the recruiting pipeline from schools open as long as possible and started cutting new hires with sometimes less than one or two years experience.

What then?

The revenue model of professional services firms is based on hourly rates and that means people. More people equals more billable hours assuming there’s demand, but more fixed expense. If demand goes down or the market contracts as it did when some firms lost clients through failures and acquisitions like Deloitte, they start laying off. And they have less people work more hours. They’re on salary, after all, not hourly. And they replace higher paid professionals with lower paid professionals. They even cut partners.

That’s called the leverage model.

Once you go to work for the firms, you’ll be forced into the reality of auditor litigation and constant reminders of risk, independence, and quality policies. You’ll see your firm’s name in the paper more often now than ever before. You should think hard about some serious industry issues:

• Should auditors be immune from liability or accountability for their malpractice and when they’re guilty of aiding and abetting fraud? That’s the “safe harbor” proposals some advocate. But in reality it’s moral hazard.
• Does the “too few to fail” argument have merit?
• Is it realistic for us to expect auditors to acknowledge a public duty?
• Do audit firms have a right to look after their partners and their profits before the public?
• Do accountants working in for-profit private audit firms still feel like professionals? Are they treated that way by partners and clients?
• Can large audit firms ever maintain ethical standards, as a firm and as a group of individuals?
• Whose ethical standards should the firm and the individual uphold?
• Can an individual who would otherwise be ethical or at least true to his own values, become compromised while working for a larger firm?

When a professional services firm strays from the principles in AICPA 50, it runs the risk of sacrificing values, culture, a code of ethics and the requirement to put the client’s interests above the firm’s.  That’s what it means to work in a firm made up of  “professionals.”

A corporate structure rather than a partnership, for example, means a professional services firm has to focus on financial results and meeting shareholder expectations rather than meeting partner expectations within the constraints of the values, expertise and professional code of ethics that the firm agreed on when it came together.

Some interesting examples of corporate model professional services firms with varying levels of success are:

• BearingPoint a spin-off of KPMG (They went bankrupt and big pieces were bought by Deloitte and PwC.)
• Accenture, Huron Consulting and Protiviti all have an Arthur Andersen pedigree,
• Resources Global, a spinoff of Deloitte.
• Cap Gemini has a large piece of Ernst & Young’s consulting firm that was spun off in the heat of Sarbanes-Oxley.

Growing too large or acquiring firms that have very different values or culture, even within the partnership model, can also stretch the limits of aligned behavior.

One legal case that will have a significant effect on how employees of the audit firms view themselves and how the firms view their contribution is the class action in California, Campbell v Pricewaterhouse, a lawsuit about overtime.

Several overtime lawsuits are pending against some of the major accounting firms doing business in California. These suits were filed by non-CPAs, non-licensed associates (entry level college graduates), who believe they were misclassified under California law as exempt professionals and are due overtime and other benefits due to non-exempt employees.

A few states like California, Wisconsin, and Massachusetts  – and Canada where similar suits were settled with very little notice here – have wage and hour laws that are perceived as more employee-friendly.

I have mixed feelings about these lawsuits. In twenty-five years of working as an accountant, consultant and internal auditor, I have never been paid time and a half. When you choose to work in a profession, you don’t expect it.

My father belonged to three unions and has pensions and generous health benefits in retirement as a result. When I was growing up, as the oldest of six on the South Side of Chicago, his overtime pay as a fireman and bricklayer was what made extras like vacations and college possible. But it was the dream of an easier life for their kids – we’d earn higher pay for less manual labor because they had worked long and hard to educate all of us – that drove my parents to give us the chance for a “professional” career.

Many college graduates, these days, don’t see the point in working eighty hours a week during the busy tax or audit season for a fixed salary. When they calculate their hourly rate, even given the fairly generous salaries, signing bonuses, and benefits the best and brightest get as new Audit Associates, many question the total cost of the sacrifices they’re making.

All they see are strained relationships with family and friends, excessive stressful travel, late nights spent performing mind-numbing “monkey work” on laptops, non-stop scanning and photocopying, fewer partners and opportunities for promotion, and very little use of the ambition and brains they thought they were hired for.

It’s no wonder that when the firms started cutting staff during the general economic slowdown, when Sarbanes-Oxley work slowed and then the financial crisis hit, accountants starting careers in the new millennium had to squint to see the light at the end of the tunnel.

Although the state and federal wage and hour laws governing eligibility for overtime pay are complicated, the public policy issues they present for audit firms are not.

The largest public accounting firms want entry-level accounting graduates to feel like professionals, by virtue of their university degree, the potential to take the Certified Public Accounting (CPA) exam, and their eligibility to be licensed eventually. But when it comes to eligibility for overtime – or rather exemption from overtime – it’s not who you think you are or where you came from but what you actually do that matters most.

The education of accounting majors consists, in the worst case scenario, of being “taught the exam” and, in the best case, of four to five years of head-down, hard-core study and rote memorization of facts with rarely any time for other outside reading, enrichment, travel, or world view development.

The suits are all in various stages but Campbell v. PricewaterhouseCoopers is the fastest moving.  A judge agreed in 2009 that the audit associates at PwC in California are not exempt from overtime pay under the 2001 wage order. This decision was appealed by PwC.

The Ninth Circuit Court of Appeals accepted the case and Campbell was argued in June. The appeals court reversed a portion of the decision and the case will now go to trial. If it’s not settled first.

Using the Masters in Accountancy degree in order to reach the 150-hour CPA licensing requirement also complicates things in some states.

If some of these lawsuits are successful, universities that provide their states’ CPA hour requirements without the necessity of a graduate degree may doom their graduates to status as “para-accountants” until licensing?

There’s an economic argument at play here: In this environment more work produced for less pay is both tolerated by labor and a business model that rewards firms with higher profitability.

But there’s also a practical regulatory issue at stake: Can the regulators allow audit firms – who play a role as critical regulatory cogs in the financial system wheel – to delegate more judgment and decision making over financial reporting and disclosure to the lowest level of staff because they are the per-hour cheapest?

Individual assimilation and success in a Big 4 public accounting firm starts with selection based on university credentials, referrals from professors, family background, and business ties, as well as having political beliefs and economic philosophies that are aligned with firm values. This process now starts in some universities in freshman year, with some students having two or three internships before they graduate.

For some students it starts even earlier.  One or both parents work for the audit firms and the career is one that has always been considered a safe choice.  That’s especially true if the apple doesn’t fall far from the tree in talents and personality.

Auditors often marry other auditors or accountants because in school or in their early career they have no time to date anyone else!

Internal operations of the public accounting firms, especially the largest ones, are conducted in a secretive manner. Financial results and common business metrics are minimally disclosed to the outside and on a “need to know” basis even internally. Once initiated into firm culture, survival requires adoption of an informal oath of allegiance that makes it shameful to betray even one’s deadliest enemy, your competitors, to legal and regulatory authorities. It’s a Big 4 type of omertà, the extreme form of loyalty and solidarity in the face of authority usually attributed to the Mafia.

Examples of an extreme sense of loyalty to even those who’ve disgraced the profession can be found when partners that have been sanctioned by the SEC, forbidden to audit public companies, are later reinstated. Deloitte, for example, kept the partners responsible for Delphi and Navistar on their payroll during their SEC suspension and they survived the sanction to audit more public companies.

Only in cases of potential criminal indictment, such as insider trading or the tax shelter scandals are individuals thrown under the bus by their firms.  That’s because the financial and reputational risk to the firms of not cooperating with a Department of Justice criminal indictment is more significant than the cost of defending and typically settling private securities litigation.

Private parties have significant difficulty getting fraud suits against audit firms past the complaint stage to discovery and a trial given the higher requirements for pleading based on the Private Securities Litigation Reform Act of 1995. Investors have to present hard evidence such as whistleblowers or leaked documents very early in the process to prove complicity in the fraud or deliberate fraudulent behavior on the part of auditors.

When was the last time you heard about a whistleblower from one of the Big 4 firms?

In addition, the federal authorities are fiercely reluctant to be the instrument of destruction of another firm a la Arthur Anderson via a criminal indictment or a significant SEC civil complaint. That means the auditors have as much moral hazard now under the “too few to fail” doctrine as the banks have under “too big to fail.”

However, that doesn’t mean the audit firms aren’t faced with an enormous amount of litigation they spend significant time and money fighting.

And we haven’t even gotten started with holding them accountable for their role in the financial crisis.

It’s not easy for an individual external auditor to step up and do the right thing. The model of providing audits, a critical public service meant to protect shareholders via a profit making private partnership, often encourages “behavior that must be regulated.”

Many accounting professionals who work for the audit firms write me to ask about their “true client.” They have either never been taught this concept or had it beaten out of them by the reality of which behavior is rewarded at their firms.

The client for audited financial statements is the shareholder, not the company management. The Audit Committee of the Board of Directors, who hires and is supposed to manage the external auditor. The Audit Committee represents that shareholder client but has a legal duty to the corporation not the shareholder. Other stakeholders include bondholders, lenders, employees, vendors/customers who depend on the continued viability of the company, and regulators (whose role is to protect investors and overall capitalist system.)

When professionals forget or suppress acknowledgement of their true client, an auditor loses the ability to properly structure decisions with moral and ethical implications, let alone those with serious legal and regulatory ones.  In the face of potential legal implications of a decision, they seek to avoid personal liability.  In the face of a moral or ethical dilemma, they look at costs/benefits of looking out for their own financial self-interest, at an individual and at a firm level rather than shareholders’ and society’s interests.

Major investors have told the PCAOB that they feel they’ve been left out.

I believe auditors demonstrated a profound lack of professional skepticism and professionalism during the crisis. They ignored the possible motives and motivations of their audit subjects.

Rather that assuming executives, and possibly the Board of Directors, are self-centered and human, they accorded them the highest form of deference. In the interest of maintaining financial and social relationships, in my opinion the auditors did not sufficiently challenge and expose the survival instincts and financial incentives of corporate executives and board members. That may be because the firms, paid by management, have their own financial incentives to stay quiet.

Whistleblowers and those that push unpopular ideas or try to report on wrongdoing often lose their jobs, are vilified by the former employers and sometimes their former colleagues, are often disbelieved and laughed at, attributed with bad attributes and intentions such as revenge, anger, payback, whining, mercenary goals, bitterness, spite, Don Quixote-like tilting at windmills, unreasonable idealism, and impractical expectations.

Whistleblowers are often very right, but often end up being right all alone.

How many times has an external or internal auditor been told when raising concerns or questions about lack of segregation of duties, improper expense reports, lack of proper authorizations for stock options or shady compensation decisions:

“He’s a man of integrity.  He lives this company. He is a pillar of the community.  He donates to charity.  He is an elder statesman of the industry. He has unquestionable, unassailable ethics and cares about this company.”

Speaking up can be a career- limiting move, threatening your own livelihood in addition to the success of your office, your practice, and your firm.

But auditors, who are inevitably almost always CPAs, have a higher responsibility.  Making the type-two error of being right in your suspicions of illegal activity and potentially enormous harm or loss and not acting on them is completely unacceptable.

Don’t let anyone ever tell you again, after Madoff and the rest of the cases of hubris we have seen during this ignominious year, that any man or woman is above suspicion.

Professors: Please teach your students the principle of professional skepticism.

Students:  Never stop questioning authority.

The PCAOB, under the leadership of new Chairman Jim Doty, is raising many of these issues and speaking frankly and consistently about them. Professor Showalter sits on the PCAOB’s Standing Advisory Committee and has heard the same heated exchanges as I have. Some recognize the need for change and others will fight to maintain the status quo at any cost to the profession.

We can wait for regulation to change. But we can also act every day to promote positive change in the profession.  Your attitude, your actions, and your focus on independence and integrity can force change, too.

The 27th Annual Futures Industry Association Futures and Options Expo starts Monday night and runs through Wednesday at the Hilton on South Michigan Avenue. I’m really looking forward to the networking sessions, courtesy of my media pass under Forbes.com. I’m also planning to attend everything on Dodd-Frank and the futures and options industry that I can stay awake for.

Also in town this week is the Mortgage Bankers Association Annual Conference. This promises to be very interesting, especially in light of my new assignment as a columnist for American Banker. I’ll be wearing the “Accountable” hat as I walk those halls. First up tomorrow, The Future of Mortgage Servicing, right before lunch.

Count on that session to be the anti-apéritif.

My most recent column for American Banker, ““Banks Hire Friendlies for ‘Independent’ Foreclosure Reviews”, received some nice mentions form Yves Smith and her blog Naked Capitalism. Not once but twice she quoted and mentioned it and mentioned it positively. (Not always a guarantee with Yves! But Yves and I are usually simpatico.)

On Friday:

So it should be no surprise to read Francine McKenna telling us that “Banks Hire Friendlies for ‘Independent’ Foreclosure Reviews.” This was a feature, not a bug…

McKenna is right: making the reports public would be a check on whether this effort was serious. And the publication of defects in servicing is not going to threaten the soundness of a bank or lead to bank runs. There is no justification for secrecy, save the reason we understand all too well, that it would expose the fact that this exercise was never intended to be serious.

And again Sunday morning:

If you’ve been following this sorry saga, you may recall that in April of this year, major servicers entered into servicing consent orders with the OCC and Fed. They were clearly all for show. Rather than observer the normal procedure, and have a regulator conduct the exams, the consent orders instead provide for the banks to hire soi-disant independent parties to conduct the reviews.As we and more recently Francine McKenna pointed out, there is pretty much no one with a brand name that is worth renting that doesn’t either have a relationship with the big banks or is keen to develop one. Since the reviews won’t be made public, there is every reason to expect that any problems reported will be strictly cosmetic.

As low as our expectations were, the banks have managed to undershoot them on the downside. Levitin reports on an ad via a temp agency (!) for the sort of foot soldiers who will be performing the audits. Note that this means, contra McKenna, that the actual work won’t be done by experienced professional staff of major firms…

Professor Levitin has exposed the dirty little secret of the advisory side of the Big 4 and other consulting firms that agree to do these kinds of routine, clerical, mind-numbing, file review assignments. No firm has enough cheap local staff anywhere, even in New York, to get so may reviews of so many files done on time and on budget. Some firms, like the law firms and the Big 4, now have temp firms on call to do this kind of scut work. They also tap their offshore teams in India and other low wage countries that can go through a scanned file  - assuming the records exist -much cheaper than any U.S. citizen ever would.

What doesn’t happen, as I know and Yves Smith and Professor Levitin know, is the global firms don’t bring in their own staff from all over the country, all over the world, using the power and strength of their brand and global network, at their expense, to serve their clients with a consistent level of top notch and premium billed resources.

That would be too expensive – or rather it would cut into margins – and also force the partners who won the work to share the spoils with their colleagues. Better to subcontract or use an offshore firm to keep everyone aware of who is boss and who owns the client.

What I wonder is if the OCC, Fed, and OTS were as careful about insisting on independence from the client for subcontractors as they supposedly were for the firms awarded the contracts as the lead.

I’m crossing my fingers twice.

But, I guess, I’m “real” enough for now for Carney.

John gave me an early shot at wider press attention when he asked me to write something about the Satyam scandal for Clusterstock, a blog of Business Insider.  Yes, of all things, he asked me to write about the Satyam scandal, bless his Irish heart. The Satyam story was swirling after it broke in early 2009 but, of course, no U.S. based media outlet was covering it in any detail or consistently because it was happening in India. John was going on vacation and needed a fill-in.

I wrote, “Satyam’s Bollywood Tragicomic Soap Opera,” in April of 2009.

Then John asked me to write something to explain what I was saying about New Century and repurchase risk in terms of Wells Fargo and Wachovia.

That was in September of 2009. “Did Wells Fargo’s Auditors Miss Repurchase Risk?” was prescient.

Wachovia, now owned by Wells Fargo, recently settled a very large class action lawsuit related to the misrepresentation of the risk of their portfolio of subprime sludge to Wells Fargo bondholders. KPMG, auditor of both banks, kicked in $37 million to the settlement.

Attorney David Kessler of Kessler Topaz Meltzer & Check, LLP, co-lead counsel to the class, reminded me that this was the third settlement by KPMG for subprime sins, after New Century and Countrywide.

Kevin LaCriox at D&O Diary: In what is the largest settlements so far to arise out of the subprime meltdown-related securities class action litigation wave, and apparently the largest settlement ever of a securities suit filed solely under the Securities Act of 1933, the parties to the consolidated Wachovia Preferred Securities and Bond/Note Litigation have collectively agreed to settle the suit for a total of $627 million. The settlement is subject to court approval. The lead plaintiffs’ August 5, 2011 memorandum in support of the motion to approve the settlement can be found here, and the parties’ settlement stipulation can be found here.

The settlement amount of $627 million represents two different settlement funds: $590 million on behalf of the Wachovia defendants, including 25 former directors and officers of Wachovia, as well as 72 different financial firms that underwrote bond offerings for Wachovia between 2006 and 2008; and $37 million on behalf of Wachovia’s auditor, KPMG. According to data from Institutional Investor Services, the collective $629 million settlement, if approved, would represent the fourteenth largest securities class action settlement of all times.

Last November, John Carney recognized my early call on these lawsuits – and the auditors’ role and responsibility in the allegations.

Where does the confidence in the map come from? It could be that Citi is taking assurance from the work of its auditors, KPMG. But this assurance could be misleading. As Francine McKenna of the blog Re:TheAuditors points out, KPMG has a long history of approving poor disclosures when it comes to repurchase risk.

McKenna first reported on poor disclosures at a KPMG audited company in 2007. That company was New Century. It hadn’t disclosed anything about repurchase risk in earlier filings with the Securities and Exchange Commission. But, suddenly, it was revealing that banks were demanding that it buy back mortgages it had sold. If all the mortgages were put back to the company, New Century said it would be on the hook for $8.4 billion.

Later, in an article for Business Insider, McKenna reported that Wells Fargo was not reporting the quantity and quality of its repurchase risk.

Carney and I shared the virtual stage recently – although neither of us knew it at the time that we were both being interviewed  - on the Background Briefing program on Australian National Radio, “Auditing the Auditors.”

But it was the unexpected endorsement of my most recent column on Forbes.com, “Bank of America Buys Time Via Buffett Effect,” that I wanted you to see today. I have never “pitched” John. I have never asked him to notice my work and he doesn’t have to ask me to notice his. He’s just the kind of guy who does things like this without being asked, cajoled, bribed, or for any other reason than that he is watching the news closely and, every once and a while, sees my take on it as worthy of notice.

If you read one thing about Bank of America today, I hope it will be Francine McKenna’s fine column in Forbes.

She notes that the Bank of America bulls, including the estimable John Hempton of Australia’s Bronte Capital, seem to be counting on is: 1) that the government will backstop any bank as big as Bank of America and 2) that accountants will never make Bank of America deliver seriously bad news about the value of its assets or the likely costs of its legal liabilities…

Please read the rest of John Carney’s fine column, “Bank of America’s Auditors Taken to Task,” here.