For two days this week the audit regulator, the PCAOB, solicited feedback from investors, audit committee members, professional groups like the IIA, former regulators, academics and business leaders on improving auditor independence, professional skepticism, and audit quality.
It’s difficult for me to imagine a new generation of systemically important financial services company CEOs without strong risk management experience. But the newly prominent role also gives shareholders, regulators, and the media an easy target for ridicule after a corporate stumble or failure.
My trusted investor “straw man” reminded me that GM’s current stock price is much lower than the IPO price and far short of the target for a U.S. Treasury breakeven on the investment. That’s an easy story to write.
Have you been following the trials and tribulations of Bank of America and their auditor, PricewaterhouseCoopers, LLP?
I was quoted on May 2 in an article in American Banker by Alex Ulam entitled, “Why Second-Lien Loans Remain A Worry”. My quote focused on disclosures and transparency – for the loans and the reserves for losses. It’s a subject I’ve written about extensively.
Which bank should feel threatened by Assange and Wikileaks? I’m betting on Citigroup. And…Did you know the Federal Reserve Bank makes up its own accounting principles? Call it “Government GAAP”, but don’t call it fair value.
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.
John Carney at CNBC NetNet is talking a lot about repurchase risk. He’s tied it all together in a bow for us, mentions Citigroup and Bank of America, and has given me credit for having been on KPMG’s case for a while.
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?
The financial crisis is now about fraud. The word that dared not be uttered, even behind closed doors, has now disturbed the peace of a nascent “recovery.”
When each of the notorious “financial crisis” institutions collapsed, were bailed out/nationalized by their governments or were acquired/rescued by “healthier” institutions, they were all carrying in their wallets non-qualified, clean opinions on their financial statements from their auditors.
In preparation for something else, I attempted to do a quick summary of the pending litigation against the Big 4.
It’s not easy.