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I was the first to report on December 6 the irony of Deloitte having been selected by, of all banks, JP Morgan Chase. The high likelihood of a conflict between the bank and the audit firm, and possibly the individual Deloitte partners assigned to the JP Morgan Chase review, should have been obvious to anyone at the OCC. It turns out I was right.
Going Concern reported yesterday that KPMG professionals have been ordered to preserve all correspondence and documentation related to the tax “loaned staff” assignment it has with long-time client GE. That means someone – the SEC or PCAOB – is investigating.
I’m writing now for American Banker. My first column covers a new appointment at Deloitte and how this might affect the firm’s clients in the mutual funds industry.
The SEC has accused one of the most prominent businessmen ever implicated in such crimes, Rajat Gupta, a former McKinsey & Company Global Managing Director, of insider trading. It’s understandable that, in the heat of this moment, some might naïvely compare the consequences of the criminal indictment of an audit firm with civil charges against an individual, albeit one who trades on – pun intended – his association with a prestigious professional services firm. It’s not the same thing.
Given the pressures on costs and the longstanding ties some finance, audit, and accounting executives have with the accounting firms, it is not surprising that the weakening of the independence commitment may come from the companies themselves. What’s the downside for them? The potential for scrutiny by corporate governance experts and journalists? You can’t argue with a recession. And in the event of an accounting scandal or restatement, plaintiff’s lawyers will have an uphill battle to penetrate the impenetrable auditor liability shields and caps.
What’s lost in all of this discussion of efficiency and cost cutting?
Independence protects shareholder’s interests.
Unfortunately, I was unable to attend the AICPA National Conference on PCAOB and SEC Developments in person. As much as I would have loved to be there live, to ask questions and, perhaps, walk all over the wafflers with my Manolos, it’s not always possible. In this case it may have been just as well. [...]
Every once and a while someone asks me,
“fm, how do you keep up with all the news, the stories? How do you know all this stuff?”
Well…Although I have been accused of conceit, presumption, being “too smart,” being too quick to draw conclusions, painting a whole firm black on very little basis, precociousness, general egotistical behavior [...]
Funny thing happened last night while chatting with the COO of one of the major hedge funds, a group that has been much maligned lately for being shortys. For the umpteenth time in the last month or so it seems, someone assumed that my partner in our firm (actually my brother) was my husband.
“PS. [...]
Michael David Thomas over at The Daily Caveat does a nice wrap up on the latest charges by the SEC against AOL/Time Warner.
Who is AOL/Time Warner’s auditor?
It has been Ernst and Young since before the merger between AOL and Time Warner in January of 2000. Ernst and Young was also AOL’s auditor before the merger. [...]
Photo Source
All the firms spend a lot of time and money publicizing their good works. Between time spent on volunteerism and donations by their offices and foundations and all the diversity crapola, it’s a bucketful of money they spend to erase the fact that they’re otherwise sucking money out of the economy for a dubious [...]
 Francine McKenna (@retheauditors) has more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. Look for my column, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. Your firm can sponsor this specialized news site. For more information contact Francine McKenna, fmckenna@mckennapartners.com |
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