It’s been almost three years since I first broke the story of KPMG’s loaned tax staff arrangement with audit client GE. On January 24 the Securities and Exchange Commission (SEC) announced an $8.2 million settlement with KPMG over violations of auditor-independence rules. The wheels of justice turn very slowly. But the GE case was not one of the three cited as the subject of the enforcement action.
How do the audit firms keep winning the war while losing battles left and right? They use the law and the courts to delay, deter and distract from transparency by settling, and sealing what they can, before the public can find out what silly arguments they often make in their defense.
Who has the last word on audit quality and compliance with GAAP and SEC filing requirements for US-listed foreign companies? If you were hoping it was the US audit firm, you’ll have to prove your case in court.
Are auditors too cozy with management and the Audit Committee? Unfortunately, that the way they all seem to like it. Investors and the capital markets suffer.
There are five big auditor independence issues that space prevented a full discussion of yesterday and that are not on the agenda of the PCAOB SAG meeting this week. My hope is that regulators, policy makers and other interested parties will start talking about these issues, too, while I am in DC this week.
Deloitte has been caught thumbing its nose at regulators again. Deloitte is the best example in the Big Four of how a large consulting business corrupts an audit firm.
Do you want to learn more about those who push for a return to the gold standard? Do you know the common thread between JP Morgan, Madoff’s biggest feeder fund, Chesapeake Energy, and MF Global? Here’s a speech I gave back in May 2012 in New York to the Committee for Monetary Research and Education that touches on both topics.
BLBG publishes the Advocate for Institutional Investors, a quarterly newsletter which contains reporting and analysis of the latest securities and corporate law issues. The Advocate often features articles by the management and general counsel of some of the largest public pension funds in the country, as well as some of the nation’s premier securities litigators. This Spring the magazine also features my writing on the subject of private litigation against audit firms.
It’s easy to forget, with all the propaganda being published by major media, why these Fed/OCC consent decrees were issued in the first place. The fact that a borrower may be in default does not negate the overwhelming evidence that court cases have provided that banks proceeded fraudulently and illegally in some foreclosures and looted those borrowers and institutional investors in mortgage securities by charging fraudulent and illegal fees in the process.
Here’s the thing…The perception of auditor independence is as important, or maybe even more important, than the fact of auditor independence. This is not new.
I was at New York University’s Vincent C. Ross Institute of Accounting Research to speak on a panel that included Paul Volcker, Bob Herz and a lawyer representing PwC and EY. The Ross Roundtable on the “Impact of Reemergence of Consulting Practices at Major Audit Firms” was well attended.
HP announced today it is writing down more than $5 billion, or almost half of the Autonomy acquisition price, because of “serious accounting improprieties, misrepresentation and disclosure failures” by Autonomy former executives. Deloitte was the auditor of Autonomy, a UK software firm acquired by HP in 2011 for $11.1 billion.