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The purpose of this blog is to serve as an outlet for my thoughts on (1) higher education in general and accounting education in particular, (2) financial accounting and its regulation, and (3) accounting humor and accounting movies.
For years I have been sending e-mail posts to AECM–Accounting Education Using Computers and Multimedia, the international e-mail listserv for accounting professors. To some extent, this blog permits me to write at greater length on the listserv issues to which I respond. An added benefit is I can avoid filling my colleagues’ e-mail inbox with so much junk.
The Summa is, of course, a reference to a book by Brother Luca Pacioli, a famous mathematician and professor of the late 1400s and early 1500s. Pacioli is famous for two books: Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion – published in 1494), and De divina proportione (Of Divine Proportion – illustrated by Leonardo DiVinici). It is in the Summa that Pacioli included a description of the bookkeeping/accounting system of Venice. In honor of this contribution, Pacioli has carried for centuries the title of Father of Accounting. His section on bookkeeping was republished several times over the next four centuries, often under the name of a different author.
The text of all posts is copyrighted by David Albrecht on the date of posting. The copyright to Albrecht’s images is retained. The rights to all other images used in this blog are owned by others.
Although I am a professor at Bowling Green State University, the thoughts presented in this blog are my own and not those of the university. My right to publish my thoughts is protected by academic freedom, and my obligation to publish those thoughts in any medium I deem appropriate. My university does not tell me what to write nor does it tell me where to publish. I do not know if anyone at the university either agrees or disagrees with the ideas presented here.
Contact David Albrecht at: albrecht@profalbrecht.com
Weekly Stats since September 2008
Through February1, 2005
Americans Strike Out 0-55 with State Boards of Accountancy,
None Discipline Big Four CPA Auditors for Major Debacles
By Carl Olson
Chairman, Fund for Stockowners Rights
The American public has so far struck out 0-55 for help from boards of accountancy in the ongoing national financial system crisis. None has imposed significant discipline on any of the Big Four CPA auditing firms in years despite the spate of multi-billion dollar financial fiascoes aided by faulty CPA audit opinions.
Complaints were lodged against Deloitte & Touche, Ernst & Young, PricewaterhouseCoopers, and KPMG for numerous adjudicated lawsuits and regulatory findings. Out of the 55 boards, twenty-seven did not even respond in writing. The other 28 have not yet reported any discipline on their auditing problems. (See chart at http://www.cpawatch.org.)
CPA audit opinions engender trust by the investing public for financial statements. Boards of accountancy are supposed to protect the public of each state plus the District of Columbia, Puerto Rico, Virgin Islands, Guam, and Northern Marianas. The boards license Certified Public Accountants, CPA firms, and other accounting professionals. The boards can investigate complaints about misbehaving licensees over malpractice, negligence, fraud, and other offenses. Offenders are subject to fines, costs, mandatory re-training, and suspensions and revocations of licenses.
Complaint letters were sent on June 16, 2008, with follow-up letters on October 22, to all 55 boards of accountancy with significant CPA transgressions.
For PricewaterhouseCoopers, The Wall Street Journal of November 1, 2007, reported, “The suit alleges, among other claims, that Tyco International Ltd. committed securities fraud by improperly accounting for acquisitions and manipulating quarterly results. Earlier this year, Tyco agreed to pay about $3 billion to settle the case, which would be the largest payout in a securities litigation by one company. Tyco’s auditor at the time—PricewaterhouseCoopers LLP, which was also a defendant—has agreed to pay $225 million.”
For Ernst & Young, The Wall Street Journal of February 16-17, 2008, noted, “Ernst & Young LLP settled for $300 million a lawsuit brought against it by Cedant Corp., according to a securities filing late last year by a former Cedant subsidiary. It its suit, Cedant alleged that Ernst negligently failed to detect massive fraud during its audits of a unit of the company. Ernst had already, in 2000, paid out $335 million to Cedant shareholders as a result of the fraud. That is believed to be the largest-ever settlement by an auditor related to work for a single client.”
For Deloitte & Touche LLP, The Wall Street Journal of December 11, 2007, reported, “In its first-ever enforcement case against a Big Four accounting firm, the nation’s audit watchdog fined Deloitte & Touche LLP $1 million and censured the firm
over its work checking the books of a San Diego-based pharmaceutical company [Ligand Pharmaceuticals].” In another case, The Wall Street Journal of December 28, 2007, noted, “Accounting firm Deloitte & Touche has agreed to pay $38 million as part of a $328 million settlement of investor claims of misconduct by Delphi Corp. and those that oversaw its finances.”
For KPMG, The Wall Street Journal of March 28, 2008, reported, “Xerox Corp. said it will pay $670 million to settle a shareholder lawsuit over alleged accounting misdeeds, while its former auditor KPMG LLP, will pay $80 million.” Additionally, The New York Times of March 27, 2008, reported, “New Century Financial, whose failure just a year ago at the start of the credit crisis, engaged in ‘significant improper and imprudent practices’ that were condoned and enabled by auditors at the accounting firm KPMG, according to an independent report commissioned by the Justice Department.”
In another case, The Wall Street Journal of July 18, 2005, noted, “A California superior-court judge sanctioned KPMG LLP last week for withholding documents in an accounting malpractice lawsuit brought by a small private computer-case maker, the third time the big accounting firm has been criticized by a judge for its legal tactics in recent months. In an order issued Wednesday, Orange County Superior Court Judge Geoffrey Glass instructed KPMG to pay $30,000 for ‘its abuse of the discovery process’ and directed the jury to consider such behavior as it weighs the case brought by Targus Group International Inc.”
KPMG’s multi-billion dollar illegal tax shelters have resulted in disciplining in 3 of 55 jurisdictions. In January 2008 the California Board of Accountancy issued a stipulated settlement and disciplinary order imposing a fine of $1 million and investigative costs of $385,000 on KPMG. The Texas Board of Accountancy imposed fines of $1000 each for 96 violations plus administrative costs of $3842.45, and Washington imposed a $10,000 fine.
Much better enforcement needs to come from boards of accountancy. The American public cannot continue to rely on bogus CPA audit opinions. These CPA firms must be deterred effectively and swiftly from continuing to inflict such dangerous mis-directions on millions of investors.
END
______________________________________________________________________________
Fund for Stockowners Rights is a 501c(3) nonprofit group. Carl Olson, Chairman
P. O. Box 65563, Washington, D. C. 20035, 703-241-3700
West Coast Office, P. O. Box 6102, Woodland Hills, California 91365 818-223-8080
watchdog@cpawatch.org
Oh, I understand your point now, it’s about credit downgrades. Sure, I think the correct answer is to run the gain through comprehensive income instead of the income statement. Then, the comprehensive amount can be reversed as payments are made. I also agree, I think that policy, at least in this instance, should follow public sentiment.
Lucca Pacioli, however, would be rolling over in his grave.