Auditors Get Tough On Banks, Banks Say "Huh?"
It looks like the pressure has gotten to them, or maybe their “industry group” suggested this would be a good PR move. Unfortunately it’s too little too late. For example, there’s Citi. When, or really will, KPMG ever make them put the crap on the balance sheet? If they ever do, they’ll have to resign and then turn the clean slate over to one of their compadres.
Call me skeptical. But, I have to ask… Where was this toughness before?
But the most telling quote comes from the original FT article:
“We don’t see ourselves as the right people to provide guidance, but we can provide the context, that’s our role,” said Pauline Wallace, a partner at PwC and the co-ordinator of the project.
If the audit firms are not there to provide guidance, who’s keeping an eye on the CEOs? I think you know the answer to that question:
No one, Nadie, Ninguém
Big ‘Six’ draw up bank audit blueprint
Top firms come together to create ‘consistency’ in audit of subjectively valued sub-prime related derivatives
The Big ‘Six’ accounting firms are sharing their approaches to the auditing of bank assets, in an extraordinary attempt to create calm over the highly-fraught area of valuations of sub-prime related derivatives.
The Financial Times, which has seen a paper outlining the approach, says it will be published next month, pulling together all the relevant parts of International Financial Reporting Standards, in the process of being adopted by more than 100 countries worldwide.
The valuation of bank assets has become more and more subjective as the market for the derivatives concerned has collapsed. But a collective approach could also invite criticism if the audit firms are collectively wrong in their approaches.
The FT said it was clear the audit firms intended to take a ‘tough line’ like demanding persuasive justification if a bank were to turn to model-based calculations where market prices, however unfavourable, existed. The paper is also designed to allay fears the continued market turmoil would lead banks and their auditors to different conclusions about how they valued holdings and what was a fair price, the FT said…
‘Given the importance to the market of consistency in times like these, it’s good that the large firms are coming together to make sure we have that,’ said Jan Babiak, managing partner for regulatory and public policy at Ernst & Young.
You’re beginning to sound like me.