Auditors face being called to account for their role in the global financial crisis | Business | The Observer .
For decades, auditors have enjoyed self-regulation. This has led to senior accountants, mainly from PricewaterhouseCoopers and KPMG, assuming rule-making status. Many argue that this apparent conflict of interest has led to auditors skilfully deflecting blame for failing to spot glaring black holes or fraud at a range of institutions from Enron to Madoff and the failed banks.
UK forensic accountant Richard Murphy says: “The fundamental question is how accountants got away with changing rules of accountancy, which state they don’t have to assess the valuation of assets underlying the assets on a balance sheet. How did they get away with changing the audit rules?”
The Observer begins to ask the over due question - why have the auditors had a ‘good recession’ when they so obviously contributed so seriously to the misinformation and opacity that helped cause it.
It’s time they were called to account - and made to both pay and reform.
Richard Murphy Accounting, Auditing, KPMG, PWC
Madoff lawsuit attacks KPMG UK - Accountancy Age.
There’s another legal action to add to the mountain of litigation threatening the future of the Big 4. As Accountancy Age notes:
An investor in Bernard Madoff’s mega Ponzi scheme have now named KPMG UK in a lawsuit in which they claim the firm failed to spot the fraud while auditing Madoff’s London operations.
The action is being brought on behalf of investor Jay Wexler, an investor of “hundreds of thousands” dollars in Rye Select Broad Market Prime Fund, one of many feeder funds into the Madoff Ponzi scheme.
“Instead, KMPG UK never raised any red flags that investors’ money was used by Madoff as his personal piggy bank.”
Madoff has apparently confirmed he used London for abusive purposes.
And I’d stress: the primary purpose of an audit is not to find fraud.
But when the primary purpose of a company is fraudulent the audit should find that out.
How long can the Big 4 survive this sort of claim?
And is it true that mark to market and auditing standards that do not require them to look beyond the last traded price for an asset will bring them down although I have no doubt they created the whole system to mitigate their risk?
Richard Murphy Auditing, Corruption, KPMG
KPMG and PWC Icelandic offices raided by police | AccMan .
Dennis Howlett notes serious professional conflicts for KPMG in Iceland - which they did not acknowledge.
But let’s also be honest - there’s on in the Isle of Man as well where KPMG are supposedly sorting out the mess it may not be suggested they helped create.
How long can we tolerate this sort of thing?
Are there any ethics left in these firms?
And is it now the case that we should realise we might be able to create global transactions but that we do not have the capacity to regulate them and as such they are potentially harmful?
Might it be small really is beautiful?
Richard Murphy Accountancy, Ethics, KPMG
KPMG and PwC Reykjavik offices are raided by Icelandic police - Telegraph.
Police have raided the offices of KPMG and PricewaterhouseCoopers (PwC) in Reykjavik, seizing documents and computer data as part of an investigation into alleged criminal activity at three collapsed Icelandic banks.
Among the matters being investigated are “violation of laws on accounting and annual reports, violation of laws on financial institutions and securities transactions and violations of laws on public limited companies”.
The office of Olafur Thor Hauksson, the Icelandic investigator charged with examining the collapse of the three banks a year ago, confirmed that 22 policemen and six foreign accountants took part in the searches yesterday.
“The purpose of the searches was to look for and secure evidence related to the investigation of several charges which have been investigated by the office,” a statement said.
“Nuffin to do with us, guv’nor” you can here the firms saying now.
And the standard comment will be rolled out internationally - “This is an issue for the local firm”.
Both of which lost credibility a long time ago.
Richard Murphy Auditing, Banking, KPMG, PWC
Manx Herald Isle of Man - Letter to the Editor – KSF (IOM) DCS ‘cock-up’.
Seems KPMG are turning the mess of the Isle of Man banking disaster into a straightforward cock up.
But what would you expect? The moral is ‘Don’t bank in the Isle of Man’ - a message that is becoming stronger by the day
Richard Murphy Isle of Man, KPMG
KPMG audit head defends controversial Rentokil role - Accountancy Age.
KPMG’s audit chief has penned a strident defence of his firm’s controversial Rentokil service, arguing the arrangement was ethically sound and caters for the “unprecedented challenges” faced by businesses today.
Audit guidelines warn of two dangers when an external auditor takes on internal duties. The first concerns the potential for a company to audit its own internal work, while the second concerns auditors making management decisions.
Controversy has centred on the potential mix of internal and external audit services the firm has offered, which has raised eyebrows across the audit industry in recent weeks.
Let’s be blunt: there is no defence for this. It is flagrantly wrong. Internal audit is a management function. Holding that post and being external auditor has to mean you are in flagrant breach of all independence rules.
But what do KPMG care? They have only one ethical yardstick - as has been proved time and again, which is the profit they make from a deal.
This one makes them profit. So they’ll do it.
The answer is very obvious: strip their audit licence. It is clear they ae not fit and proper persons to act as auditors as they have proven they cannot identify a confluct of interest.
Richard Murphy Auditing, KPMG
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