E&Y - Interesting question by Gilmore

Cookie_Monster

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An interesting question posed by Gilmore today from the above story

"What's going to happen here Taoiseach when they come to forensically examine the loans that were transferred by Sean FitzPatrick from Anglo Irish to Irish Nationwide. And when they come to forensically examine what role did the auditors play in that process.

It seems insane to have appointed E&J to do this since they were involved in the first place but that aside there is no way they can come out of this well. Either they close over it to protect themselves or comment on how inappropriate (or worse) it was and shoot themselves in the foot.

What do you think?

Hackysack

This is one of the areas that i've never been able to understand about the entire thing. I can't get my head around the fact that E&Y could have possibly overlooked the transferral of these loans, especially if they performed an adequate post balance sheet review of the accounts. Maybe my understanding of it all is down to inexperience or lack of understanding but is there something else that i'm missing?

I'm really not sure how it could have occurred, and i'll be very interested to see what results come out from any investigation that may happen.

JD1763

Nope E&Y were just inept - nothing new there tbh. What was the line again about an audit not being about detecting fraud but simply verifying the information as provided in the accounts/by management? Trying to paraphrase it (and badly) but it was something I was told when I started in a Big 4 (not E&Y) and recent events were being discussed. Basically summed up to we're not responsible if management deceive us and we're not good enough to catch it.

smcgiff

JD1763 wrote: »

Nope E&Y were just inept - nothing new there tbh. What was the line again about an audit not being about detecting fraud but simply verifying the information as provided in the accounts/by management? Trying to paraphrase it (and badly) but it was something I was told when I started in a Big 4 (not E&Y) and recent events were being discussed. Basically summed up to we're not responsible if management deceive us and we're not good enough to catch it.

That and the perception gap, which i think goes along the lines of...

The public think an audit is to find errors in a company's accounts.

And Auditors think an audit is ... a nice little earner.

Something like that anyway :rolleyes:

ianuss

JD1763 wrote: »

What was the line again about an audit not being about detecting fraud but simply verifying the information as provided in the accounts/by management? Trying to paraphrase it (and badly) but it was something I was told when I started in a Big 4 (not E&Y) and recent events were being discussed. Basically summed up to we're not responsible if management deceive us and we're not good enough to catch it.

auditors are watchdogs, not bloodhounds.........comes from a judges ruling in a case in the UK as far as I can remember.

censuspro

An Auditors job is to state whether the financial statements give a "true and fair view" of the financial position of a company.

Simple question: Did the Financial Statements of Anglo Irish Bank represent a "true and fair view"? A blind man on a horse knows the answer to that question.

Now we have a farcical situation where E&Y have won a government contract and been appointed to the Loan Valuation Panel of Nama, they have also been appointed to investigate the transactions between Anglo and IL&P even though they were the auditors of Anglo at the time. We also have PWC who has also won a government contract to provide tax advice to NAMA and then we have KPMG who have won the government contract as Auditors of NAMA. All of these firms have audited Irish banks which are covered by the bank guarantee scheme and NAMA and not one of them qualified the audit reports which they signed. Not to mention that their clients are also the same developers who are havin their loans transferred to NAMA. So in the same firm, you will have E&Y advising their developer clients who's loans are being transferred to NAMA, and at the same time advising NAMA on what to do with those loans. You could not make this stuff up!

J.Ryan

God knows, I'm no fan of the big firms, having prepared accounts files for them to audit and having interacted with some of their auditor when they were doing the field work, I better stop this before I go into a big rant.

It is very hard to detect frauds were multiple levels of staff are working together to perform it.

In this country it is always the auditor that gets blamed, remember the offshore bank account scandals. People and Banks were working together to evade tax, auditors get blamed, why weren't the officers of the banks arrested and charged with tax evasion, one of them is back in the Dail FFS.

censuspro

J.Ryan wrote: »

God knows, I'm no fan of the big firms, having prepared accounts files for them to audit and having interacted with some of their auditor when they were doing the field work, I better stop this before I go into a big rant.

It is very hard to detect frauds were multiple levels of staff are working together to perform it.

In this country it is always the auditor that gets blamed, remember the offshore bank account scandals. People and Banks were working together to evade tax, auditors get blamed, why weren't the officers of the banks arrested and charged with tax evasion, one of them is back in the Dail FFS.

Have you been drinking black russians again?

J.Ryan

censuspro wrote: »

Have you been drinking black russians again?

Ah Guppy, how are things, its been a few years.

Cookie_Monster

J.Ryan wrote: »

In this country it is always the auditor that gets blamed

no auditor have so far been blamed for anything in this current crises, which is crazy.

J.Ryan

The Directors loans could easily have been hidden, the issue I have with the bank audits is the bad debt provisions in the 2008 (& earlier) financial statements.

That is where I would like to know what work was done, especially now when it is coming out that security wasn't always in place, that is stuff that the auditors should have uncovered.

hinault

Anglo Irish was quoted on the NYSE/FTSE/ISEQ.
Therefore Anglo were required to prepare their financial statements under International Financial Reporting Standards (IFRS).

It could be argued that under IAS 7 and IAS 24, that Anglo and it's auditors failed to disclose the loans concerning Anglo directors.

The fact of the matter is that no potential investor, by reading the statutory reports of Anglo Irish Bank (or Irish Life for that matter) could be aware that the banks directors had loans.

The objective of statutory financial reporting is to disclose to, and to inform, potential investors of "true and fair view" of the company in question.
The statutory accounts - as signed off by E&Y - did not present a true and fair view of the financial records at Anglo.

Nor did the accounts satisfy the criteria that Anglo Irish was capable of being a "going concern" : which is required to be disclosed.

Stabshauptmann

[Pure speculation] Anglo had ex-PWC partners on the board and knew how audits are preformed and how to mask transactions - in particular they knew what cut off dates were being used for tests [/pure speculation]

JD1763

Without having read any of the audit reports - when giving their view on whether the banks were going concerns did any auditor mention the concentration risk of the property portfolios particularly on the commercial side? Were there any stress tests applied for reductions in value? We all hear about how audits are a 'value adding' activity but all that has been proven from recent events is that they verge on a complete and utter waste of time.

If a firm collapses auditors hold their hands in the air and go 'its not our job to detect fraud'. By working on the assumption that all the necessary/correct information has been passed on by management when doing the job, it completely invalidates the whole process if management set out from the beginning to deceive the auditors and they do not question the figures deeply enough or are not observant/skeptical enough to even consider this possibility.

The role of auditors needs to be re-examined from the very beginning, as it stands now they are nothing more than fee generators for partners dominated by the key priority of keeping the client happy in case they lose the contract next year. From the myriad of accounting scandals since 2000 we have learned that the audit reports cannot be relied upon by investors, regulators or the general public. They are not worth the paper they are printed on.

Controversial I know and Im sure I'll get some choice remarks back but tbh the whole stinks to high heaven.

R0N BURGUNDY

lol @ blind man on a horse!!