I wrote this article for AccountingWEB, of which I was once an editor. It was out yesterday:
You can read the whole thing here. There is no paywall but you may need to register.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“Professional Credibility is everything” – or maybe not, these days.
I am not familiar with the Accounting World but in Finance
Bankers Trust, the leading derivatives trader in the world was caught mis-selling inappropriate products to a Greetings Card company in the mid-90s and, in the end, was bought by Deutsche Bank for $1.
Refco the largest independent futures broker in the world was found to have played a “shell game” with a some bad debt. Within a week it was out of business. (2005).
In short, clients did not want to do business with dodgy institutions and they collapsed.
Wind forward 10 or 20 years and we see any number of institutions mired in far worse scandals…… but they stay in business.
What does this say about clients (ie. us)?
I think it’s tempting to think that the only thing they have not done is cover their tracks more effectively.
on the subject of auditing how can Trumps accountants Mazars USA say that it can no longer stand by 10 years of annual financial statements it had prepared for the group ?
dont they do auditing in USA ? –or did KPMG do it ?
oh ! dear
It is an interesting question…..
interesting article – KPMG’s biggest issue is the falsification of documents for the regulator i think.
They have long (3-4 years) been a source of concern in the industry – there was a concern a few years ago that they might collapse and the other firms were considering how to help them – i believe there was an agreement that the other 3 firms wouldnt recruit any partners from them for a while. You would have to be mad to join KPMG at the moment.
Mazars didnt actually audit Trumps financials – he didnt need audited financials, they just “compiled” them from the information Trump gave them (which they are no expressing doubts on – specifically the property valuations etc
How is KPMG going to compensate the people of Liverpool for the chaos left by their audit of the unpredicted collapse of Carillion halfway through the construction of the new hospital?
It isn’t
CNN issued a summary here:
https://edition.cnn.com/2022/02/15/politics/mazars-trump-letter-letitia-james/index.html
Two short paragraphs reveal the conflicted position adopted by the audit firm:
The firm told the Trump Organization that “based upon the totality of the circumstances, we believe our advice to you to no
longer rely upon those financial statements is appropriate.” But Mazars noted that it had not concluded that “as a whole” the
documents “contain material discrepancies.”
Mazars also stressed that the work the firm did was performed “in accordance with professional standards.”
How can Mazars warn that the financial statements are not reliable and at the same time claim they conform to professional standards and don’t contain material discrepancies? The ghost of Arthur Andersen is stalking them.
Interesting, isn’t it. No doubt the lawyers have been busy drafting these ambiguous statements.
“While we have not concluded that the various financial statements as a whole contain material discrepancies, based upon the totality of the circumstances, we believe our advice to you to no longer rely upon those financial statements is appropriate.”
Do these accounts contain material discrepancies, yes or no? “We have not concluded that they do, as a whole.” (So does that mean the accounts have material discrepancies on points of detail, but not as a whole? Or that they decided not not reached a conclusion, or perhaps been asked not to reach a conclusion?)
Even so, it is appropriate to advise the client and third parties that they should not rely on the accounts anyway. Why ever not, we might ask? Is it because they are not reliable?
More importantly, they consider that this advice gives them a “non-waivable conflict of interest” so they can’t do any more accounting work. They don’t say whose interest conflicts with the interests of their client – perhaps the interests of an unidentified third party, but perhaps more likely their own (that is, they are worried about their own position as an accounting firm).
Extraordinary, however looked at