Feeds:
Posts
Comments

Archive for December, 2010

Bloggers love the final post of any year, because it is time for “The Best Blog Posts of the Year.”  Although it might seem as if bloggers are back patting themselves, there is a higher purpose for these posts:  milking just a few more reads without having to write new content. I’ve reviewed the posts from the third year of The Summa, and have selected my favorites.  The posts at the start of the year are dominated by accounting standard setting issues, convergence and IFRS.

Debit and credit

Read Full Post »

I am able to write a different style of post at my other blog, Pondering the Classroom.  I just put up the year-end summary.  I hope you are able to read and enjoy these blog posts on college life.

Best of Pondering the Classroom – 2010

Debit and credit – – David Albrecht

 

Read Full Post »

The audit model is broken, it never had a chance.  The large audit firms partner with corporate management to produce financial statements that are misleading.  Accounting standard setters, under the influence of politicians, large audit firms and corporate management are gung-ho for adopting IFRS and accounting standards that are corporate friendly.  Night has descended on the accounting world.

Don’t you wish we could take back the accounting world?  I do.  Some BGSU students have an interesting take on taking it back.  For proper viewing, imagine that E&Y and/or Lehman Brothers Holdings, Inc. is the Christmas thief, and Santa is, well, Santa.

If only we accountants could take back the night.  Where is Santa when we need him?

Debit and credit – – David Albrecht

Read Full Post »

At this time of holidays and family, we at Profalbrecht (meaning me with all my hats:  professor, teacher, advisor, mentor, writer, accounting theorist, commentator, accountant, auditor), send you well wishes and season’s greetings.

Auditor’s Opinion
December 24, 2010

We have audited the accompanying greeting card of The Summa (the Blog) as of December 24, 2010.  The greeting card is the responsibility of the Blog’s management.  Our responsibility is to express an opinion on the greeting card based on our audit.

We conducted our audit in accordance with greeting standards of the Public Company Greeting Cards for Accountants Oversight Board (PCGCAOB). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the greeting card is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and sincerity underlying the sentiments expressed in the greeting card.  An audit also includes assessing the holiday greetings used and significant expressions made by management, as well as evaluating the overall greeting card presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the greeting card referred to above presents fairly, in all material respects, the holiday sentiments position of The Summa at December 24, 2010, in conformity with U.S. generally accepted greeting accountability principles (GAGAP).

We also have audited, in accordance with the standards of the Public Company Greeting Cards for Accountants Oversight Board (PCGCAOB), the Blog’s internal control over holiday sentiments as of December 24, 2010. Our report dated December 24, 2010, expressed an unqualified opinion thereon.

 


For an example of what a holiday greeting card for a law firm looks like, in all its legalese, click here.

Debit and credit – – David Albrecht

Read Full Post »

For the record, I am not advocating that Ernst & Young should bite the dust.  My interest is academic.  If Ernst & Young bites the dust, then I want to know about it and talk about it.

What I am advocating is that the system should be changed.  Many audit firms consider themselves to be a partner with corporate management as they report financial statements.  Consequently, these audit firms allegedly fail to qualify their audit opinions for many observed irregularities.  By doing so, they put investors at risk, they put the market at risk, they put citizens at risk,  they put the country at risk.

I would be happiest if the firms would simply stop this dysfunctional behavior and partner no more.  Although the firms are paid by the corporations, they should be working on behalf of investors and the market and citizens and the country.

Now, if that doesn’t happen, then maybe we need a new system.

Debit and credit – – David Albrecht

Read Full Post »

Today, December 21, 2010, the Attorney General of the State of New York filed civil suit against Ernst & Young for fraud in connection with financial reporting by Lehman Brothers.

Does this mean that we have entered the era of the Big 3?

The charges (Ernst-Young-Complaint) were filed by New York Attorney General Andrew M. Cuomo on behalf of the citizens of New York.  Here are a few key excerpt (with my highlights on key wording):

E&Y substantially assisted Lehman Brothers Holdings Inc. (“Lehman,” or the “Company”), now bankrupt, to engage in a massive accounting fraud, involving the surreptitious removal of tens of billions of dollars of securities from Lehman’s balance sheet in order to create a false impression of Lehman’s liquidity, thereby defrauding the investing public.

The allegations conclude with:

E&Y knew every significant aspect of Lehman’s Repo 105 transactions, and knew that the Lehman financial statements violated Generally Accepted Accounting Principles (“GAAP”), which require that such statements (a) not be misleading, (b) fairly disclose the Company’s financial position, and (c) not omit material information necessary to fairly present the financial position. As the public auditor for Lehman, E&Y had the absolute obligation to ensure that Lehman’s financial statements complied with GAAP and did not mislead the public.  Instead of fulfilling this obligation, E&Y gave a clean opinion each year, erroneously stating that Lehman’s financial statements complied with GAAP. E&Y sat by silently while Lehman deceived the public by concealing the Repo 105 transactions and misrepresenting the Company’s leverage. By doing so, E&Y directly facilitated a major accounting fraud, and helped Lehman mislead the public as to its true financial condition. E&Y, which reaped over $150 million in fees from Lehman, must be held accountable for its role in this fraud.

In the complaint, Cuomo alleges that Lehman Brothers was engaging in Repo 105 transactions from 2001 until 2008 (date of Lehman bankruptcy) with full knowledge and approval of Ernst & Young.  Allegedly, Ernst & Young knew the motivation for the Repo 105 transactions was to distort the financial statements.  Also, allegedly Ernst & Young knew that in practice Lehman’s transactions violated the terms of the Linklaters letter of safe harbor.

Until settled in a court of law, Ernst & Young stands legally innocent.  However, if these charges are true, then I simply can’t imagine that any investor would view any Ernst & Young audit opinion as credible.  Even if Ernst & Young escapes these charges, my faith in the firm has been shaken to the core.

Debit and credit.

Read Full Post »

Renewal of the Estate Tax

Sorry to break in with a post on taxes.  Taxation is the practice of law, not of accounting, but accountants do practice it.

The recently passed tax bill contains a provision for reinstating a tax on estates transfers upon death, effective January 1, 2011.  This tax had expired for the 2010 tax year.

If you want escape this new federal tax, you must die by 11:50 p.m., December 31, 2010.

It is rumored that some wealthy individuals who are in failing health, are considering suicide so as to qualify for estate taxation under 2010 rules.  Some hints if you are one of these unlucky citizens.

  1. Don’t ask one of your heirs to assist you in your demise.  They should be prosecutable under a myriad of statutes.
  2. Be aware that suicide might be ruled as attempted tax fraud, and your estate might be taxed anyway.  Bummer, not being able to escape either death or taxes.

Debit and credit – – David Albrecht

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 104 other followers

%d bloggers like this: