Bloomberg (October 14)
“Ernst & Young LLP took Bernie Madoff at his word when it signed off on audits of a fund that helped feed the biggest Ponzi scheme in U.S. history. The firm must now defend that decision at the first trial of an auditor over losses tied to Madoff, who’s serving a 150-year prison term for stealing billions of dollars from thousands of investors.” The case will be tried by jury in a state court in Seattle and comes just after “the Public Company Accounting Oversight Board, the lead U.S. audit regulator, warns that one in three audit opinions in the U.S. lack appropriate supporting evidence.”
Tags: Audits, Bernie Madoff, Ernst & Young, Evidence, Investors, PCAOB, Ponzi scheme, Prison, Regulator, Seattle, Trial, U.S.
Financial Times (July 29)
Regulators need to achieve “a complete redesign of audits and the way auditors deliver them.” Currently, auditors provide questionable value. “Did auditors give shareholders any advance warnings about failures and losses at Royal Bank of Scotland, Northern Rock, Anglo Irish, MF Global, Lehman Brothers, Bear Stearns, AIG or Barclays? US companies spend nearly $50bn annually on the ‘Big Four’ (PwC, Ernst & Young, Deloitte and KPMG) but the auditor rarely speaks or is questioned at annual meetings.”
Regulators need to achieve “a complete redesign of audits and the way auditors deliver them.” Currently, auditors provide questionable value. “Did auditors give shareholders any advance warnings about failures and losses at Royal Bank of Scotland, Northern Rock, Anglo Irish, MF Global, Lehman Brothers, Bear Stearns, AIG or Barclays? US companies spend nearly $50bn annually on the ‘Big Four’ (PwC, Ernst & Young, Deloitte and KPMG) but the auditor rarely speaks or is questioned at annual meetings.”
Tags: Audits, Big Four, Deloitte, Ernst & Young, KPMG, PwC, Regulators, Shareholders
Bloomberg (December 22)
Just weeks before being sued for its role as auditor of Lehman Brothers, Ernst & Young (E&Y) was advertising that it could help companies identify “new risks related to fraud and corruption.” A Bloomberg editorial agrees that “E&Y may have lots of experience in this field,” but adds it’s the wrong kind of experience. “It’s indisputable that E&Y blessed Lehman’s financial statements quarter after quarter, year after year, falsehoods and all.” The problem is all of the large audit firms have had the wrong kind of experience. “Killing E&Y or any of the other Big Four audit firms — PricewaterhouseCoopers LLP, Deloitte & Touche LLP and KPMG LLP — would leave just three large survivors, when the industry has too few competitors already.”
Tags: Big Four, Ernst & Young, Fraud, Lehman
Businessweek (December 21)Businessweek (December 21)
Ernst & Young LLP is being sued by New York Attorney General Andrew Cuomo for enabling Lehman Brothers to engage in a major accounting fraud designed to deceive investors. Lehman routinely moved liabilities off balance sheet for a period of over 7 years while Ernst & Young was its public auditor. Through what became known as “Repo 105” transactions, Lehman would sell debt before reporting dates with an agreement to repurchase the debt afterwards. As much as $50 billion was hidden from view through this window-dressing tactic. According to Cuomo, who will soon step aside as Attorney General to become New York’s Governor, “This practice was a house-of-cards business model designed to hide billions in liabilities in the years before Lehman collapsed.”
Ernst & Young LLP is being sued by New York Attorney General Andrew Cuomo for enabling Lehman Brothers to engage in a major accounting fraud designed to deceive investors. Lehman routinely moved liabilities off balance sheet for a period of over 7 years while Ernst & Young was its public auditor. Through what became known as “Repo 105” transactions, Lehman would sell debt before reporting dates with an agreement to repurchase the debt afterwards. As much as $50 billion was hidden from view through this window-dressing tactic. According to Cuomo, who will soon step aside as Attorney General to become New York’s Governor, “This practice was a house-of-cards business model designed to hide billions in liabilities in the years before Lehman collapsed.”
Tags: Accounting, Audit, Cuomo, Ernst & Young, Fraud, Lehman
