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Are auditors being unfairly blamed?

  • 15-04-2010 7:23pm
    #1
    censuspro
    Registered Users, Registered Users 2 Posts: 881 ✭✭✭


    "Are auditors being unfairly blamed for the problems being discovered at Irish companies"

    This was the poll in the Irish Times Today. What do you think?

    Are auditors being unfairly blamed for the problems discovered at Irish companies? 12 votes

    Yes they are being unfairly blamed
    0% 0 votes
    No they are not being unfairly blamed
    100% 12 votes


Comments

  • #2
    Southsider1
    Closed Accounts Posts: 674 ✭✭✭Southsider1


    censuspro wrote: »
    "Are auditors being unfairly blamed for the problems being discovered at Irish companies"

    I think the nub of the problem is that the Auditors didn't discover the problems/scams or else they did but kept schtum.... Either way they should be penalised very heavily for it. It's their main job to find these things.


  • #3
    Ideo
    Registered Users, Registered Users 2 Posts: 1,618 ✭✭✭Ideo


    Southsider1 wrote: »
    It's their main job to find these things.

    Is it now? I thought their job was to ensure that the accounts are true and fair...


  • #4
    whatawaster
    Registered Users, Registered Users 2 Posts: 12,910 ✭✭✭✭whatawaster


    Southsider1 wrote: »
    It's their main job to find these things.

    no it's not.

    They have a duty to report fraud, or breaches of legislation if they find them, but they are engaged to ascertain whether or not the financial statements show a true and fair view of the companies affairs.
    It is not possible to check every penny, every transaction, every balance. Samples are used, judgements made. Human error will always come into it too


  • #5
    censuspro
    Registered Users, Registered Users 2 Posts: 881 ✭✭✭censuspro


    whatawaster wrote: »
    no it's not.

    They have a duty to report fraud, or breaches of legislation if they find them, but they are engaged to ascertain whether or not the financial statements show a true and fair view of the companies affairs.
    It is not possible to check every penny, every transaction, every balance. Samples are used, judgements made. Human error will always come into it too

    How about €7 BILLION in Post Balance Sheet Events and €155 million in directors loans?


  • #6
    whatawaster
    Registered Users, Registered Users 2 Posts: 12,910 ✭✭✭✭whatawaster


    I find it hard to believe these things were not found. I was addressing the point that its the auditors main job.

    I think directors of large, public companies have too much power to appoint and change auditors. Perhaps the government or the stock exchange should reserve that right. Otherwise they are never going to be completely independent.


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  • #7
    Cookie_Monster
    Registered Users, Registered Users 2 Posts: 24,537 ✭✭✭✭Cookie_Monster


    IMO the auditors are getting away with it for the most part. How come those who signed of the last 10 years of Anglo accounts aren't been done for gross negligence, corruption or simple massive incompetence?


  • #8
    censuspro
    Registered Users, Registered Users 2 Posts: 881 ✭✭✭censuspro


    Cookie_Monster wrote: »
    IMO the auditors are getting away with it for the most part. How come those who signed of the last 10 years of Anglo accounts aren't been done for gross negligence, corruption or simple massive incompetence?

    Quite the opposite. They've just landed Government contracts with NAMA.


  • #9
    Southsider1
    Closed Accounts Posts: 674 ✭✭✭Southsider1


    whatawaster wrote: »
    no it's not.

    They have a duty to report fraud, or breaches of legislation if they find them, but they are engaged to ascertain whether or not the financial statements show a true and fair view of the companies affairs.
    It is not possible to check every penny, every transaction, every balance. Samples are used, judgements made. Human error will always come into it too

    So noone spotted the transactions at Anglo where millions (or was it billions) were transferred in for the audits and out again after? Yeah. It's not possible to check every penny.... but maybe it's possible to spot the odd billion or two??;)


  • #10
    fontanalis
    Closed Accounts Posts: 3,619 ✭✭✭fontanalis


    censuspro wrote: »
    Quite the opposite. They've just landed Government contracts with NAMA.

    The comedy just writes itself!


  • #11
    whatawaster
    Registered Users, Registered Users 2 Posts: 12,910 ✭✭✭✭whatawaster


    Southsider1 wrote: »
    So noone spotted the transactions at Anglo where millions (or was it billions) were transferred in for the audits and out again after? Yeah. It's not possible to check every penny.... but maybe it's possible to spot the odd billion or two??;)

    If it was billions, yes, no doubt.
    If it was millions maybe not, as even amounts that big might be immaterial, and not something the auditors were looking for.

    But . . . although i don't know a lot about this case, Director's loans are a special case. I'm not 100% on this, but i believe that Financial Statements are required to disclose the terms of all director's loans, the closing and opening balances of those loans and, crucially, the maximum outstanding values of the loans during the year. This was obviously not the case here.


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  • #12
    censuspro
    Registered Users, Registered Users 2 Posts: 881 ✭✭✭censuspro


    This poll seems all the more relevant after last nights rte programme Frontline.


  • #13
    censuspro
    Registered Users, Registered Users 2 Posts: 881 ✭✭✭censuspro


    whatawaster wrote: »
    If it was billions, yes, no doubt.
    If it was millions maybe not, as even amounts that big might be immaterial, and not something the auditors were looking for.

    But . . . although i don't know a lot about this case, Director's loans are a special case. I'm not 100% on this, but i believe that Financial Statements are required to disclose the terms of all director's loans, the closing and opening balances of those loans and, crucially, the maximum outstanding values of the loans during the year. This was obviously not the case here.

    My understanding is that the full amount od the loans were not disclosed as directors loans, which means they were disclosed as something else and there in lies the question. What where the loans disclosed as in the financial statements and was it a case that the directors mislead the auditors or was it a case that the auditors didn't carry out due dilligence in their audit work?


  • #14
    crapmanjoe
    Registered Users, Registered Users 2 Posts: 472 ✭✭crapmanjoe


    censuspro wrote: »
    My understanding is that the full amount od the loans were not disclosed as directors loans, which means they were disclosed as something else and there in lies the question. What where the loans disclosed as in the financial statements and was it a case that the directors mislead the auditors or was it a case that the auditors didn't carry out due dilligence in their audit work?

    The legislation changed during 2009 ( primairly as a result of the Anglo directors antics, previously all that was disclosed was the balance at year end. Directors are now required the largest position held during the year.


  • #15
    djk1000
    Closed Accounts Posts: 899 ✭✭✭djk1000


    These accounts are prepared under IFRS, the main purpose of which is to provide a framework of principles, this is very different from the rules based approach where a company/accountant/auditor would be able to argue that they followed the letter if not the spirit of the law.

    Under IFRS it is the spirit that counts and following the letter should be no defense.

    For the non accountants reading this, the auditors role was defined in an English court case where the judge said that auditors are "watchdogs not bloodhounds" meaning that they have a duty to highlight fraud if they come across it, but they are not there to seek it out.

    Are the auditors in these cases break any rules? probably not. Are they completely inept? definitely.

    But, nothing will change, to audit a bank/big plc, you need a lot of resources and you need some serious professional indemnity insurance, only the big 4 can handle it and all of them have been tainted in some way by recent scandals.

    In my opinion, there should be some seriously draconian penalties for directors of big companies, particularly banks. Heavy Old testament type punishments, lets not forget, because of the things these guys pulled, people have lost homes, jobs and some have even taken their own lives.

    Put it this way, I pay my taxes, I'm an accountant and if I wanted to, I could make a pretty good attempt at not paying tax, but I don't because I have seen how hard the Revenue come down on people when they are caught. If the chances of me being caught was 1 in 100, it still wouldn't be worth it. I would go to jail, I'd spend the rest of my life paying tax and interest, I'd never be able to work as an accountant again, even my pension could be hit until I pay what I owed.

    Why don't we just make the downside so completely unpalatable for these guys that they go into work every single day completely focused on propriety. If Sean Fitzpatrick knew that hiding the substance of a balance sheet transaction would lead to him being frog marched to general population in mountjoy for 5 to 10 years while all his assets were sold and his family moved to some dank little flat somewhere and that his pension would be clawed back, would he have done what he did? If every director on the board was held to be as responsible, would they have been more interested in what was going on?


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