Available now on the Kindle: re: The Auditors on Careers: A Compilation On Recruiting, Salaries, and the Competitive Employment Landscape
The next time something goes terribly wrong at a Berkshire Hathaway company, there’s a strong possibility no one will hear about it. Warren Buffett and Charlie Munger won’t be held directly responsible either. That’s the beauty of Buffett’s version of a conglomerate corporate structure, decentralized to such an obscene level such that its minimalism is brandished as a feature not a bug.
Sarbanes-Oxley was supposed to end financial scandals once and for all. Will Dodd-Frank succeed where it failed? My OpEd for Boston Review is online today, Monday, August 22, 2011.
In the last few weeks, I’ve written two very different stories about Deloitte. Both stories bothered me, but in different ways, so I was compelled to write about the firm both in unsympathetic and sympathetic terms. In the end, neither story says much about the state of the audit industry and the pre-2011 regulation of the audit firms.
The Berkshire Hathaway Annual Meeting draws a huge crowd because it features several hours of the wit and wisdom of Berkshire Hathaway CEO and Chairman Warren Buffett and his friend and Vice Chairman Charlie Munger. To say that Buffett, Munger, and Berkshire Hathaway have a cult-like following would be a a significant understatement. I attended the meeting and here’s my report.
Enron, WorldCom, HealthSouth, Tyco, Parmalat, Adelphia, AIG…You would think enough lessons had been learned. The financial markets are a mess and the capitalist system threatened. The systems in place to anticipate and preempt market risk failed completely.
The Supreme Court of the State of Delaware issued an opinion on January 3rd, 2011 affirming the dismissal of claims against PricewaterhouseCoopers (PwC) in the Teachers Retirement System of Louisiana derivative suit. PwC prevailed because the Delaware Supreme Court had little choice but to follow New York’s direction regarding in pari delicto, barring a strong argument otherwise from the plaintiffs.
Here’s a replay of the 2010 Year In Review webcast from Securities Docket. I’m talking about auditor litigation and I’m joined by a great group of other lawyers and experts.
The Economic Affairs Committee of the House of Lords questioned representatives of the four largest audit firms on the issue of “going concern” opinions during the financial crisis. In particular, why were there none for the banks that failed, were bailed out, or were nationalized? The auditors admitted that they did not issue “going concern” opinions because they were told by government officials, confidentially, that the banks would be bailed out.
It’s as wicked as it seems…
What the SEC is doing at Delphi is quite expedient. When the SEC wants to bring civil charges for fraud against Delphi executives, the story is that the auditor was duped. And they got the auditor who was sanctioned for not performing the audit with due professional care to testify to that.
The New York Court of Appeals decided on October 21, 2010, by a vote of 4-3, to “decline to alter our precedent relating to in pari delicto, and imputation and the adverse interest exception, as we would have to do to bring about the expansion of third-party liability sought by plaintiffs here.”
The decision is flawed, misguided and strongly biased towards corporate interests rather than shareholder and investor interests.
The global money center banks are masters at managing financial reporting. Regulators repeatedly feign surprise at balance sheet sleight of hand, prestidigitation at the expert level intended to buy time until the banks can grow out of the black hole that bubble lending put them in. They announce their quarterly results, with all the details – they don’t even try to hide them anymore – and they’re ignored or the con is traded on for short term profits. We’ve yet to see the auditors called to testify to explain their role in blessing fraudulent bank balance sheet accounting.
Isn’t it about time?