As the FT notes:
A British investigation has been launched into whether Ernst & Young properly audited Lehman Brothers’ accounts in the months preceding the US investment bank’s collapse in September 2008, reports the FT. The Accountancy and Actuarial Disciplinary Board has launched a probe into E&Y’s accounting treatment of controversial transactions known as “Repo 105s” and “Repo 108s”, which Lehman regularly used in its quarter-end balance sheets.
It’s inevitable the Big 4 will become 3 one day.
And that at that point the whole edifice of auditing — with its current ludicrous state of claimed independence — will collapse with it.
The odds must be on E & Y being the one to create the tipping point now. How many more audit fiascos can it be involved in?
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I don’t think it is inevitable, people realise that the US politicians driving Andersen into the ground was stupid and merely narrowed the available auditors.
What is needed is not the demise of one firm with the resultant loss of jobs but greater control on the accounting firms and in particular limiting there scope of work to auditing which means they should hive off their tax and consulting practices.
You seem to welccome the demise of auditing – what do you suggest in its place?
@Justin
Respectfully, Andersen was not driven into the ground by the US government
It paid the price for its own failing
The failure was commercial
I do agree we need firms to be broken up
That would help enormously
But so would limiting the number of FTSE 100 companies any auditor could service to say a maximum of 15
Then we’d have a market
And an end to “too big to fail”
That’ what we have now