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Wednesday, September 16, 2020
ey & the boys prepare briefing for the ny crew
public benefit corporation
breach of fiduciary duty
viability of ongoing concern
friends and family
labor racketeering
unions who dare the feds to indict them
politicians who think they play handball like the javits center crew
people who fo not tranfer money or exchange things of value in acvordance eith applicable us supreme court decisions
people that would make spsnidh rayond snd his lawyer sun die of laughter
people thst are unlike stanley ho as they gamble
we got it all in ny but since ny is like high school athletics it will never make the wall street journal as it does not rise tothe level of even replacing a well liked italian restaurant piccolos with mr singh's poco locos
hope you too enjoy reading the applications with supporting documentation a d recirds for the ppp loans described in the ny post
After Wirecard, Ernst & Young Says Auditors Should Focus More on Fraud Prevention
Accounting firm sends letter to clients suggesting scrutiny of company books by auditors that goes beyond accepted practice
Carmine Di Sibio, chairman and chief executive of EY Global, said audits should ‘play more of a role in the future to detect material frauds.’
PHOTO: KYLE GRILLOT/BLOOMBERG NEWS
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Ernst & Young, under fire for missing a suspected fraud that blew up German fintech company Wirecard AGWDI 0.37%, said auditors should play a bigger role in detecting such wrongdoing, challenging the accounting industry’s longstanding assertion that its job isn’t to seek out malpractice.
“Whilst the primary responsibility for the prevention and detection of fraud is with the management and supervisory boards, audits should play more of a role in the future to detect material frauds,” Carmine Di Sibio, chairman and chief executive of EY Global, said in a letter sent out to clients and seen by The Wall Street Journal.
“Even though we were successful in uncovering the fraud, we regret that it was not uncovered sooner,” he said.
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The EY letter cites a number of steps the firm is taking to toughen its scrutiny of companies’ books, including looking at social media and “ongoing checks on management probity.” Such changes are “imperative for the auditing profession as a whole,” the EY letter says, adding that they “raise the bar significantly and go beyond currently accepted professional standards.”
The extent to which auditors can be held liable for frauds at companies to which they have given a clean bill of health remains a bone of contention between investors, regulators and the accounting profession. EY and the other big accounting firms have long argued that the auditor’s job—to check the accuracy of a company’s financial statements—doesn’t mean they should be expected to detect all serious frauds.
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Wirecard and the Curious Case of the Missing $2 Billion
Payment processing company Wirecard was the darling of Germany’s fintech industry until auditors uncovered a $2 billion hole in its accounting. WSJ explains what we know about the missing money, as investigators are still trying to understand what happened. Photo composite: George Downs
Lawyers representing investors counter that auditors bear a greater responsibility for detecting malpractice than the firms are often willing to shoulder.
“A primary duty of detecting fraud does lie with the auditors and we’ve won that [argument] repeatedly in litigation,” said Steven Thomas, a partner at Venice, Calif.-based law firm Thomas, Alexander, Forrester & Sorensen LLP, which has brought multiple cases against the Big Four accounting firms. The auditor stands between the investing public and management, so they are in a unique position to detect fraud, he said, adding: “But they do a terrible job of it.”
The extent to which auditors should be liable for failing to unearth wrongdoing has been debated for decades. Accounting firms have long sought to close the “expectations gap”—the difference between investors’ assumption that an audit should catch even small frauds and the auditors’ belief that they are entitled to rely on information from management.
During a U.K. parliamentary hearing last year, most auditing firms acknowledged their role in finding fraud, but added caveats. “In connection with fraud, we have an obligation under auditing standards,” said Bill Michael, a senior partner at KPMG UK. “We are not responsible for the material detection of fraud.”
Audits should provide a “reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud,” Larry Bradley, global head of audit at KPMG International, said Tuesday.
Others at the hearing addressed the expectations gap between auditors and investors. “What the public expect is to be able to rely on a set of accounts,” said Jac Berry, U.K. head of quality and risk at Mazars.
Courts have ruled auditors cannot simply eschew responsibility for fraud detection. A federal judge in 2017 ruled the Big Four firm PricewaterhouseCoopers had been professionally negligent in not detecting the criminal fraud that led to the failure of Colonial Bank Group in 2009, saying its failure to design its audits to detect fraud was a “violation of the auditing standards.” A PwC representative didn’t immediately respond to a request for comment.
Prem Sikka, a professor of accounting at the University of Sheffield in the U.K., said one reason auditors fail to detect fraud is the inherent conflict of interest created by the firms being selected and paid for by the companies. “A recurring issue is the [audit] firms are not skeptical enough.…I’m not aware any auditor ever got promoted at an accounting firm by saying ‘these people are not to be trusted.’”
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Others welcomed EY’s new stance. “It’s very commendable,” said Douglas Carmichael, an accountancy professor at City University of New York and former chief auditor at the Public Company Accounting Oversight Board. “Auditors have the ability and the mind-set” to look for frauds that cause significant errors in financial statements, he said.
EY Germany had audited Wirecard since 2009. For over a decade, investors and the media raised red flags about the company’s accounting.
EY says its audit was thorough and pointed out that it found that the money wasn’t there. But this followed alerts raised by another audit firm, KPMG LLP, which was conducting an in-depth investigation into Wirecard’s accounts at the company’s request.
Mr. Di Sibio said EY remains committed to Germany and to its operations there. Like other big accounting firms, its country-based affiliates are legally separate and independent from other entities in the global network, which means each has to face its own liabilities from lawsuits.
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