Good or bad, it was on the front page of the Wall Street Journal yesterday.
Good news because fraudsters get what they deserve. Sad news because the whistleblower still gets screwed while fraudsters find ways to cover up.
I was trying to write an article about the upcoming law suit to be filed by Andrew Cuomo against E&Y, but there’s just too much information out there. I could spend all day reading about auditor lawsuits and/or incompetence. So in the interest of writing something that people will actually read, I will simply link and provide some light commentary to how I reached my conclusion that E&Y is in trouble.
For those accounting majors with upcoming interviews for spring internships, this topic is something one should definitely consider before accepting an offer from E&Y. Zero-Hedge blog is predicting the end of E&Y’s Financial Services group and possibly the firm as a whole (ala Arthur Andersen).
First, read the WSJ for a primer on the upcoming law suit.
Second, goto Zero Hedge for a breakdown of the Repo 105/Lehman/E&Y scandal. This is a MUST READ. It provides a quick summary on Repo 105 and the actions of E&Y’s lead partners. Zero Hedge provides just enough info to back up its prediction that E&Y (either entire firm or just the Financial Services group) will go out like Arthur Andersen.
Then check out Reuters for highlights of a March 2010 letter sent by E&Y to other audit clients in defense of the Lehman examiner allegations and take note of the specific wordiness. E&Y basically says that their audit didn’t find any material misstatement and that Lehman failed because of liquidity and not from accounting issues related to the $50 billion off balance sheet Repo 105′s. E&Y says that the whistleblowers allegations would have been more significantly investigated for the 2008 audit, but Lehman went under before it got a chance. Finally, E&Y says “Should any of the potential claims be pursued, we are confident we will prevail.”
Then check out Contrarian Pundit’s blog for an analysis of E&Y’s letter to clients in response to the Lehman audit.
Lastly, be sure to check out re: The Auditors blog. Francine McKenna has been screaming out loud about the broken audit model for years. She has written in detail about everything I have previously linked to above (probably even dated weeks/months/years before it was news). Some of it is boring and long winded, but definitely worth checking out.
After spending a couple hours catching up on re: The Auditors, I gave up. I love the blog, but it’s just too much of the same. I agree with most of what she says, but it seems like nothing ever happens as far as laws and changes in industry practice. The more I read, the sadder I get about becoming a CPA and having to deal with the moral hazard that is the backbone of auditing.
Tagged as:
audit fail,
Ernst & Young,
fraud,
Lehman Brothers
