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I’m speaking at the Fourth Annual Fraud and Forensic Accounting Education Conference to be held May 13-15, 2010 at the J.W. Marriott Hotel in Atlanta, Georgia. This conference is hosted by Georgia Southern University’s Center for Forensic Studies in Accounting and Business and sponsored by Porter Keadle Moore, LLP. My presentation is entitled, “The Skeptical Professional.”
Hope to see you there!
“The recent wave of corporate fraud is raising a harsh question about the auditors who review and bless companies’ financial results: How could they have missed all the wrongdoing? One little-discussed answer: a big change in the way audits are performed.” Jonathan Weil said that in 2004. It’s as true today as it was then.
This is Part 1 of my commentary on the letter that Ernst & Young recently sent to Audit Committee members defending themselves against the findings in the Lehman Bankruptcy Examiner’s report. The Bankruptcy Examiner, Anton Valukas, found “colorable claims” against EY.
The leadership of the Big 4 audit firms – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers – are scared witless.
The way I see it, the in pari delicto doctrine is being used like a pair of needle nosed pliers by audit firm defense lawyers to diffuse the bomb – huge liability for some of the biggest frauds in history. The in pari delicto doctrine attempts to pull the auditors’ tails from the fire by excusing any of their guilty acts due to the approval of those acts by potentially equally guilty executives.
The Top Searches these past few days. Any doubt what readers are worried about?
The big lawsuits – the ones that accuse the firms of accounting malpractice or various federal securities law violations – have been chronicled ad infinitum. The accounting industry’s response to these threats is to ask for liability caps. As if we don’t have enough moral hazard in the financial system with “too big to fail,” the auditors want to institutionalize their insulation from accountability to their clients, the shareholders, with a policy of “too few to pay for their mistakes.”
Maybe PwC didn’t stand a snowball’s chance in hell to be a truly independent, objective advocate for shareholders by forcing a true and fair presentation, in all material respects, of the financial position of either AIG or Goldman Sachs and the results of their operations and their cash flows in conformity with accounting principles generally accepted in the United States of America. But is there a truly good excuse for PwC to not have been a preemptive strike force, a beacon, an early warning system for shareholders of the financial Armageddon we faced? They had longstanding, thorough, perfect knowledge of both sets of financial statements.
My friend Roopen Roy’s most recent column for MyDigitalFC.com is entitled, “Why Mergers In FirmsFall Apart.” Roopen Roy is the Managing Director, Deloitte Consulting, India.
My objective in writing this story was to handily contradict the self-serving defense to the fraud at Koss that’s being served up by Grant Thornton and supported by some commentators. But punching holes in their Swiss-cheese defense is like shooting fish in a barrel.
 Francine McKenna (@retheauditors) has more than twenty years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. For more info, click the "About" page link at the bottom of this page. |
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