Friday 12 March 2010

Echoes of Andersen haunt Lehman report



There will be some worried people at Ernst & Young right now. The mammoth 2,500 page report into the collapse of Lehman Bros has, in my admittedly hurried reading of the executive summary, uncomfortable echoes of the Enron collapse which took Big Five Accountancy firm Arthur Andersen with it.

Apparently, according to the report, Ernst & Young acting as auditor to Lehman’s, turned a blind eye over a number of years to the use of Repo 105 transactions which, and I quote, are devices to “manipulate the balance sheet” and make a company appear much more financially stable than it really is. I seem to remember that Special Purpose Vehicles (SPVs) did much the same for Enron.

All of this will only add to concerns, which have been aired for many years now, that the relationship between the major (now Big Four) accountancy firms and their audited clients is far too cosy. I witnessed, during my own albeit brief time spent in the world of accounting, the client services director calling ‘crown jewel’ audit clients to ask them for feedback on how their audit had gone and how the process could be ‘improved’ in the future.

Robert Bruce in The Times many years ago, in his Audit column, expressed deepening concern about the cosiness. As Bruce pointed out the audit process should be no more comfortable than the extraction of teeth for those companies involved.

Perhaps now it is time to dust off some of those ideas regularly floated by the likes of Professor Prem Sikka (I bet he’ll have something to say about this) for reform of accounting. How about all companies over a certain size have to change their auditors every two years? Or, appointed auditors are barred from undertaking any other fee paying work such as tax advice?

What’s the phrase, “simples”.

13 comments:

  1. I've been surfing online more than 3 hours today, yet I never found any interesting article like yours. It's pretty worth enough for me.

    In my opinion, if all web owners and bloggers made
    good content as you did, the net will be a lot more useful than ever before.
    Here is my web blog :: What is an EMT?

    ReplyDelete
  2. Your style is unique compared to other folks I have read stuff from.

    Many thanks for posting when you have the opportunity, Guess I'll just book mark this page.
    My web site :: Perth

    ReplyDelete
  3. Hey There. I found your blog using msn. This is an extremely well written article.
    I will be sure to bookmark it and return to read more of your useful info.
    Thanks for the post. I'll certainly comeback.
    Also visit my homepage www.ncesc.com

    ReplyDelete
  4. I really like your blog.. very nice colors & theme.

    Did you make this website yourself or did you hire someone to do it for you?

    Plz reply as I'm looking to construct my own blog and would like to know where u got this from. cheers
    Also visit my web blog : Tao of Badass

    ReplyDelete
  5. Hello it's me, I am also visiting this web page on a regular basis, this site is really fastidious and the people are truly sharing pleasant thoughts.
    My web page - remodeling company orlando

    ReplyDelete
  6. This website really has all of the info I needed about this subject and didn't know who to ask.
    my site > neucopia

    ReplyDelete
  7. I do not even know how I finished up right here, however I believed this post used to be great.
    I do not realize who you are but certainly you're going to a well-known blogger if you aren't already.

    Cheers!
    Also visit my site click through the following website page

    ReplyDelete
  8. I like the helpful information you provide in your articles.
    I'll bookmark your weblog and check again here frequently. I am quite certain I will learn lots of new stuff right here! Best of luck for the next!

    Feel free to visit my blog post; gracie st sugustine

    ReplyDelete
  9. Amazing issues here. I'm very happy to see your post. Thank you so much and I'm having
    a look ahead to touch you. Will you please drop
    me a mail?

    Here is my webpage :: jobs in uk
    My web site > careers

    ReplyDelete
  10. I used to be able to find good info from your articles.

    Here is my website; television show

    ReplyDelete
  11. Great work! That is the kind of info that should be shared around the
    internet. Shame on Google for not positioning this post upper!
    Come on over and visit my site . Thanks =)

    My website beautiful

    ReplyDelete
  12. Hey there, You've done a great job. I'll definitely digg it and personally recommend to my friends.
    I'm confident they will be benefited from this site.

    my blog post; Naked Girls

    ReplyDelete