In Any Other “Profession…”

In any other kind of firm, in any other profession, what these guys did would be cause for termination. 

Why are they still working for Deloitte?
Do you want them on your audit?  At the Compliance Week Conference earlier this month, I asked Tom Ray about the push on the part of some “activist accountants” – an oxymoron if there ever was one –  to change the rules about who signs audit opinions.  Some (including me) think that the individual responsible partner should be signing the report.  This recommendation (not proposal, in carefully worded language by ACAP) was made recently by the Treasury’s Advisory Committee on the Auditing Profession.  
I mentioned to Mr. Ray that, in contrast to lawyers, it’s very difficult to get information about individual partners and their clients from the audit firms.  Unless someone is a frequent public speaker or a frequent author of whitepapers, (in other words an anointed spokesperson for the firm,) you’d be hard pressed to find an email address or proof of employment, let alone a resume or photo.
I write a lot about the lawyers involved on both sides of the audit litigation cases.  When I read about a case, I usually see the name of the lawyer for the defendant and the name of the plaintiff’s attorney named in the article.  It’s rare that an audit firm will make a comment to the press about one of their clients, let alone allow the partner for that client to be quoted.   Even when an individual partner has been charged by the SEC, they are not named in media reports.  If you want to find out who the partner in charge of the AIG or Bear Stearns audit is, or about an individual partner’s experience or credentials, you can’t Google most with much success or do a search for their name on the firm’s website and see any significant results.  
Contrast that to Mike Attanasio, attorney for Dan Stulac in the Peregrine case.  After seeing him quoted in the press about his client, I looked up his name on his firm’s website, saw his photo, his resume, his list of articles published and all the cases he’s won.  I also found his contact info including email and office phone.  And, when contacted, Mike responded within 4 hours.  
That’s a guy worth paying big bucks for.
Accountability is not the auditors’ strong suit.
Here’s the article from Financial Week.
Deloitte accountant, banned from public company audits for two years after Adelphia debacle, is reinstated by SEC  

A senior Deloitte accountant who audited Adelphia Communications Corp.’s fraudulent financial statements in 2000 has been reinstated by the Securities and Exchange Commission after being banned from auditing public company statements for two years.

William Caswell, who headed a team of 20 accountants and tax professionals and reported to Deloitte’s engagement partner during Adelphia’s audit in 2000, assisted the SEC investigation into shortcomings surrounding Deloitte’s 2000 audit and “has shown good cause for reinstatement,” a June 25 commission order said.

Caswell engaged in improper professional conduct by failing to ensure adequate disclosure of Adelphia’s liabilities and related-party transactions, a September 2005 SEC order said. It said he could apply for reinstatement in two years, which he did.

In one instance, Caswell and others proposed that Adelphia disclose $1.6 billion of debt borrowed by the company and related parties. He followed up by inserting this disclosure in at least six drafts of Adelphia’s 2000 annual report. But Caswell dropped his efforts in the face of resistance from Adelphia executives and the Deloitte audit partner, the 2005 order said.

Deloitte spokeswoman Deb Harrington declined comment. In a response to a request to speak with Mr. Caswell, Ms. Harrington said he declined comment. Mr. Caswell, as part of his 2005 settlement with the SEC, neither admitted nor denied wrongdoing.

SEC spokesman John Nester said he knew of no federal data to show how common or uncommon it is for a disbarred accountant to be reinstated by the commission.

Deloitte, one of the Big Four U.S. accounting firms, agreed in 2005 to pay a $50 million penalty to the SEC without admitting or denying misconduct. After several appeals, Caswell’s supervisor, Gregory Dearlove, was barred in January 2008 from auditing public company statements. He can apply for reinstatement in four years.

Mr. Caswell had examined Adelphia’s finances for six years prior to Deloitte’s 2000 audit of the firm. Mr. Dearlove, who had little or no experience in auditing cable-TV companies, had been briefed on the company’s statements but hadn’t supervised an Adelphia audit, the January SEC order said.

Adelphia filed for bankruptcy protection in 2002 and agreed to pay $715 million to a victims’ restitution fund. Adelphia founder John Rigas and his son Timothy were convicted of criminal charges and sentenced to prison. Adelphia vice president of finance James Brown and its accounting director, Tim Werth, both pleaded guilty to criminal charges.


6 replies
  1. Independent Accountant
    Independent Accountant says:

    Ralph Nader has advocated having individual audit partners sign opinion for decades.

  2. ndallasj
    ndallasj says:

    I’m not sure which people you meant by “these guys,” but I wouldn’t have a problem with Mr. Caswell auditing my firm. He tried to do the right thing but was over-ruled; I would think that he will be more adamant the next time he comes across a similar situation.

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