Insider

It's the job - piss someone off!

Thu, 19 Jun 2008 16:43:04 +0000

I've been talking to a lot of people this week about executive remuneration and about how its calculated.
A contact suggested I go back to the report written by the Bankruptcy Court Examiner on New Century, the giant sub=prime mortgage company that went bust in the US last year.
The report raises some interesting questions about the relationship between 'accounting failures' and executive pay.
However, it was a quote from the engagement audit partner at KPMG that caught my eye.
The report from the US bankruptcy court quoted an email from the partner to a junior member of staff who had raised concerns about certain accounting practices at New Century.
The partner is quoted writing: 'I am very disappointed we are still discussing this. As far as I am concerned we are done. The client thinks we are done. All we are going to do is piss everybody off.'
I couldn't help but think, well, yeah, you will piss someone off, but then that's emphatically the auditor's job - ask brutally difficult questions.
And then it occurred to me, who did he think the clients were? I believe he thinks the company directors are. However, I can't conclude that what he should have been thinking is, what's the best thing for the shareholders here? It strikes me that the offending email embodies as a disturbing conception of the role of the auditor.
The scary thing is that KPMG in the US stands accused of contributing to the failings at New Century (denied by the firm), including accounting failures, which in turn contributed to performance bonuses for directors being 300% above what they should have been, according to the report.
My worry is that if it is a widespread belief among auditors that they are working for company directors alone, and not there to 'piss everybody off' on behalf of shareholders, the profession has moved onto very unstable ground. People will be entitled to ask whether more bonuses have been won on the back of 'failures' contributed to by auditors. And then I think we may be back at a point in 2001 (you know the one I mean) which we should have left behind long ago.
Of course, we have no evidence that this awful misconception is widespread, and let's hope its not. But it is something audit firms need to monitor and keep in check.

Click here to read the full report

IAS39: 'Like drunks getting into a car after crashing another..'

Wed, 11 Jun 2008 16:23:05 +0000

Rarely has there been such a scathing attack. Tim Bush, director at Hermes Asset Management, and scurge of regulators, chose today to air forthright views over fair value accounting and, in particular, IAS39, the standard that deals with ‘financial instruments’, or mortgages.

Wenham Major's troubles

Sat, 10 May 2008 08:59:09 +0000

If there's one topic of conversation among mid-tier firms this week its the future prospects of troubled Birmingham firm Wenham Major.

Reed beats Standard Life

Mon, 07 Apr 2008 10:16:42 +0000

You'll have spotted at the weekend that Alison Reed, former FD at Standard Life, has won her legal battle with the erstwhile employer - walking away better off to the tune of more than £1.3m.

Adieu to fair value?

Fri, 04 Apr 2008 10:44:46 +0000

The political pressure to do something about fair value/mark to market accounting is mounting.

Warning - being an NHS FD could put you away.

Wed, 02 Apr 2008 13:06:37 +0000

Philip Neal is worth talking about. He’s the NHS FD recently jailed for fraud at Chelmsford Crown Court after he confessed to false accounting to inflate a property valuation.

Blaming fair value - is it a fair cop?

Thu, 27 Mar 2008 16:46:31 +0000

Make no mistake, fair value, or marking to market is under a full blooded frontal assault by those who have had their fingers singed by the credit crunch.

Newman's awkward first job at BDO International

Fri, 14 Mar 2008 15:49:51 +0000

You've got to feel for Jeremy Newman. No sooner has he got the top job running BDO International than someone throws a spanner in the works and says that it might have to stump up $500 to settle a legal dispute.

SocGen and the true and fair opt-out

Tue, 11 Mar 2008 15:09:51 +0000

There is a furore currently underway over Societe General’s accounting treatment of the six billions euros by rogue trader Jerome Kerviel.

Non-dom departures? So what?

Tue, 11 Mar 2008 11:58:26 +0000

We're all waiting to hear whether Alistair Darling will make any changes to his non-dom policy in tomorrow's Budget, his first.

SocGen: rogue trader plus rogue accounting?

Sat, 26 Jan 2008 19:10:30 +0000

En France ce weekend and the press is full of the euro4.9bn fraud at Societe General. Astonishing that another rogue trader should appear in the form of Jerome Kerviel, SocGen's estwhile trader, especially given that the world thought that this sort of thing was behind us after Nick Leeson's escapades at Barings.

Accountants join the PM's caravan to China

Fri, 18 Jan 2008 10:48:03 +0000

Forging relationships is important in business. You need to do your networking, commit yourself to the glad handing and meet the suits who might just bring in the next multi million pound contract.

The 'far end of a fart' and Sir John Harvey-Jones

Fri, 11 Jan 2008 16:35:58 +0000

Sir John Harvey-Jones, that trouble shooter and icon of British Business, has passed away aged 88. He was remembered in thousands of words of copy for his work at ICI and heading the first UK business to turnover £1bn. Remarkable performance.

Obama: the man accountants choose to ignore

Fri, 04 Jan 2008 11:52:44 +0000

Fascinating to see Barack Obama claim victory in the first battle for the US presidential race, coming out tops in the Democrat causcases in Iowa.

Pardon me: it's only accounting fraud

Wed, 02 Jan 2008 12:35:40 +0000

Here's someone whose New Year has got off to a flying start - Kim Woo-choong, founder of the Korean conglomerate Daewoo.