tag:blogger.com,1999:blog-8431368106238433082.post1858310299369750203..comments2024-03-27T05:19:21.691-04:00Comments on FEI Financial Reporting Blog: Catch Us If You Can - GUEST POST by Sara McIntoshfinancial executives bloghttp://www.blogger.com/profile/11084436965192606339noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8431368106238433082.post-4757641651928471282010-09-18T09:31:00.319-04:002010-09-18T09:31:00.319-04:00Dear Ken,
Thank you for taking the time to commen...Dear Ken,<br /><br />Thank you for taking the time to comment on this post. It is so difficult to find people who even care these days . . .<br /><br />I find your comments to be very representative of what too many people incorrectly believe to be true: <br />1) That the auditors have a public responsibility above and beyond that of serving their clients' best interests, and <br />2) That the auditors have a "simple duty to verify existence" e.g. of actual mortgages supporting mortgage-backed securities.<br /><br />Auditors only have a "perceived" public responsibility--not a real one. <br /><br />With lawyers, we have States Attorneys and Judges who are paid by the public and have real, clearly defined public responsibilities. Same with IRS auditors being paid by the government, doing the job they do for taxpayers. <br /><br />But with respect to the auditors, the public/government doesn't pay for anything. Why would we expect the auditors or anyone else to work for free?<br /><br />And, more specifically, with respect to mortgage-backed securities and similar investments, even the PCAOB, (Public Company Accounting Oversight Board--the uber-regulators "overseeing" the Big Four and other public accountants, established as part of the Sarbanes-Oxley legislation meant to prevent future financial crises), in it's annual Inspection Reports of the Big Four, outlines standard audit procedures as being getting quotes from "outside parties" as to the "market valuation" of these investment securities--no actual review of underlying documentation, etc. <br /><br />Please refer to my blog posts entitled "What On Earth Could Be Taking So Long, PCAOB" http://bit.ly/dnrObg and "Handcuffed Without Consent" http://bit.ly/d3AJhR for a clearer picture of our abysmal accounting industry regulatory reality.<br /><br />I thoroughly agree with you that auditors need to take personal responsibility and be held personally accountable for their actions. And I do not think license revocation is even a harsh enough consequence. <br /><br />But the current flawed foundation (auditors selected, managed and paid for by the companies they are supposedly auditing) prevents, rather than fosters, responsibility and accountability. <br /><br />Good for them. Bad for us.<br /><br />Thanks again, Ken, for taking the time to comment. I hope to hear from you again in the future.<br /><br />Ciao for Now,<br /><br />Sara McIntoshSara McIntoshhttp://www.saramcintosh.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-8431368106238433082.post-65101635248162510422010-09-18T08:37:43.453-04:002010-09-18T08:37:43.453-04:00Hello Jonah,
I couldn't agree more about the ...Hello Jonah,<br /><br />I couldn't agree more about the auditors being damned if they do and damned if they don't. Especially the damned if they don't.<br /><br />The auditors are selected, managed and paid for by the companies they are supposedly auditing. Their clients hire them to "sign off on their financial statements," not withhold an "alls-well" opinion.<br /><br />Thanks as always for your insightful comments.<br /><br />Ciao for Now,<br /><br />SaraSara McIntoshhttp://www.saramcintosh.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-8431368106238433082.post-84025631480236132412010-08-13T15:49:06.403-04:002010-08-13T15:49:06.403-04:00Unfortunately for auditors they were the one gatek...Unfortunately for auditors they were the one gatekeeper, given their charge to audit management's assertions, that could have nipped this early in the game. However, even as these transactions got bundled and further removed from the underlying individual mortgages, the auditor still had the same responsibility regarding management's assertions. The simple duty to verify existence (no different than if the mortgages were widgets) has been a failure of auditors for decades. Before you can consider valuation you need to determine that the stuff actually is real, pretty simple. And it really doesn't matter whose paying the auditor. An auditor's duty is to serve the public interest not their self-interest. Auditor's need to take personal responsibility and held personally accountable. Loosing ones license for life should be a penalty used more often since it seems that financial penalties borne by firms is a price they are all willing to risk.Ken Biddickhttp://www.kbconsultinggroup.comnoreply@blogger.comtag:blogger.com,1999:blog-8431368106238433082.post-16769541815039098112010-08-13T13:41:16.545-04:002010-08-13T13:41:16.545-04:00Even without the fraud supposition, which by the w...Even without the fraud supposition, which by the way I think you have made quite plausible, there are still huge write downs lurking in the creases of a lot of bank balance sheets. Meanwhile Fed and Treasury seem to be working overtime to make sure they aren't discovered until banks can cover them from other sources. This is sure to put the auditors in an even more untenable position when it comes to proposed adjustments--damned if the do and damned if they don't.Jonah Gibsonhttps://www.blogger.com/profile/15718378638626020770noreply@blogger.com