Lehman - E & Y

ABEasy

I think E & Y may end up going the way of A. Anderson because of this. Don't know how they can wriggle out of this one, surely the true & fair view concept overrides gaap and this legal opinion/accounting framework they are hiding behind. Whatever happens the damage they and the other big 3 have done to the accounting/auditing profession is inexcusable, what will CAI (and their uk and us equivalents) do about it?


http://www.deccanherald.com/content/123858/cuomo-sues-e-amp-y.html

gottcha_goin

I agree with you. The auditors were definitely in bed with the banks on this one. But don't be surprised if nothing comes of this court case. If Ernst & Young can prove they broke no regulatory rule (which I think they have a good chance of doing) then the case will fall flat on its face. One thing for sure though it has dented the auditing professions' credibility. But then again who acted honest in the whole Financial Crisis? Not even the taxpayer can say they did!!

At the end of the day all E&Y's are separate legal entities. What affects NY E&Y could possibly have no effect on Irish E&Y.

As for what CAI should do. I think its a Goverment issue tbh. The days of self-regulating the industry needs to be seriously reconsidered.

J.Ryan

It will be interesting to see if bank shareholders sue the auditors here because of the writedown in loan values after Nama came on to the scene, the bad debt provisions in the '08 and '09 accounts should have been nailed down.

The level of security held should certainly have been looked at as part of the audit proceedures.

Jim2007

ABEasy wrote: »

I think E & Y may end up going the way of A. Anderson because of this. Don't know how they can wriggle out of this one, surely the true & fair view concept overrides gaap and this legal opinion/accounting framework they are hiding behind. Whatever happens the damage they and the other big 3 have done to the accounting/auditing profession is inexcusable, what will CAI (and their uk and us equivalents) do about it?


http://www.deccanherald.com/content/123858/cuomo-sues-e-amp-y.html

Actually US GAAP and the 'True and Fair View' are to very different things! US GAAP goes to the letter of the law rather than the spirit of the law, while the 'True and Fair View' goes to the spirit of the law rather than the letter of the law. So it follows in the USA that as long as a company follows the letter of the law, no matter how it throws the result it will probably be acceptable!

As regards law suits being filed in the US, I would not pay too much attention to them. The investigators and liquidators fire these off as a matter of course, in order to ensure that they themselves are not hauled up in court for failing to do their job!

Only time will tell if there is a real case to answer or not.

Jim.

ABEasy

I fully believe that E & Y's files are 100% in order and their opinions are justified, following the letter of the law but as previously stated by Jim not in the spirit of the law. They condoned a transaction that was designed solely to temporarily remove items from the balance sheet and had no other business justification. In other words to fool shareholders, to whom they are appointed to report to and are responsible to. I hope a class action is taken and won by shareholders against E & Y for losses made due to their inaction. Hopefully it will set an example to the other big 4 and they will take auditing and independency seriously.

I think that if the US case is sucessful the damage to the reputation to E & Y will have PLC's leaving them for more reputable firms (both in US and Europe). This is what I believe may finish them both is NY and Ireland.

I totally agree with gotcha on the self regulation issue.

ted2767

Following on from Arthur Andersen I'd imagine that every big accounting/audit firm was/is extremely careful about how it does business or what risk they are willing to accept.
While many in the public may be suprised I'd be suprised if any of the big 4 are convicted of any wrong doing.
Also while there is an understandable spotlight in Ireland on EY don't think for one minute that any of the others are blameless here or in any other country.

Jim2007

ABEasy wrote: »

I fully believe that E & Y's files are 100% in order and their opinions are justified, following the letter of the law but as previously stated by Jim not in the spirit of the law. They condoned a transaction that was designed solely to temporarily remove items from the balance sheet and had no other business justification. In other words to fool shareholders, to whom they are appointed to report to and are responsible to. I hope a class action is taken and won by shareholders against E & Y for losses made due to their inaction. Hopefully it will set an example to the other big 4 and they will take auditing and independency seriously.

You miss the point there is no requirement to comply with the spirit of the law under US GAAP, once E & Y can show that they complied with the letter of the law it is game over!

Jim.

TiGeR KiNgS

This is correct, Principles (IFRS) versus Rules (US GAAP).

oopsiedaisy

Hey guys! Thought this thread was really interesting and hoping ye could give me some advice. Basically i have to come up with a thesis idea for my masters in accounting (started a new thread but said id stick my oar in here too!) and i want to do something in relation to auditing as its my future career! The whole issue of the role of the auditors in the banking crisis and so on is something that i think would be an interesting area to research. The problem im having is coming up with good, solid research objectives/questions - my lecturers are being pretty harsh in shooting down a lot of my ideas either for having being done already or too difficult to answer blah, blah, blah. So basically im just hoping some of ye could give me some ideas to start off with!! Thanks in advance!!