Archive for July 1st, 2012

Sarah N. Lynch is a young business reporter for Reuters.  She has previously published such good work that I’ve started looking for her by-line.  Her story on Friday, June 29, 2012 alerts us to an important auditing issue.

Lynch’s story is “SEC official backs shareholders on auditor independence.”  In this story, she reports on a speech by SEC Commissioner Louis A Aguilar (Democrat) to the NAPPA 2012 Legal Education Conference in Philadelphia, PA, on June 27, 2012.

Aguilar’s speech is noteworthy for two reasons.  First, it was one of two speeches last week by SEC Commissioners in which it was emphasized that audit quality is deteriorating and investor confidence in securities markets is waning.  Second, Commissioner Aguilar disagrees with SEC staffers who have blocked shareholder proposals to rotate auditors at their company or to promote other forms of improving auditor quality.

Really?  Companies have received at least two dozen shareholder proposals to vote on auditor rotation and increased auditor disclosure, and the SEC’s Division of Corporation Finance let companies block them from shareholder vote?  Aguilar’s comments on this are highlighted below.

It is apparent that pressure is being directed at the PCAOB from the lofty heights of the Commissioners of the SEC.

Aguilar’s speech is important.  To promote your reading of relevant portions, I’m publishing them in this blog post.


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Jonathan Russell, city diary editor for London’s Telegraph Group, has an interesting story on today’s Telegraph website. It is titled, “Ernst & Young ‘Covered Up Judge Bribe Case.’

My write-up is based on Russell’s story, and his story is supposedly based on court documents.  I have no personal knowledge of anything other than Russell’s story.  I am not alleging anything, only summarizing what has been reported.

Russell writes,

Mr [Cathal] Lyons was a partner with E&Y’s Russian practice when the alleged wrongdoing came to light. It was originally investigated by James Mandel, E&Y’s general counsel in Moscow. In a witness statement supplied in support of Mr Lyons’s case, Mr Mandel said he suspected the payment may have been corrupt and wrote a report to that effect.

“I had the suspicion that this payment was not a proper payment for legal fees, but was an illegal payment possibly made to facilitate a positive outcome of a tax case,” he claimed in his witness statement.

He suspected that the €120,000 payment via a Russian law firm was made to influence a 390m rouble (£8.4m) court case brought by Russian tax authorities investigating a tax avoidance scheme E&Y was using to pay its Russian partners. E&Y was later cleared of liability in the case.

Russell continues,

Mr Lyons claims that after he reported his concerns about the case to E&Y’s global head office, his medical insurance was withdrawn and he was dismissed.

In his writ he says the dismissal flowed from “personal animosity against him rising from a discussion in late 2010 between the claimant and Maz Krupski [E&Y’s director of global tax and statutory] regarding alleged corruption by the practice.”

Mr. Lyons is suing for 20 years continuance of medical support, stemming from serious injuries sustained in a 2005 automobile accident.  The medical support payments are valued at $6,000,000.

I will make an effort to retrieve relevant British court documents.

In an interesting coincidence, Jonathan Middup, partner at Ernst & Young (UK) Fraud Investigation & Dispute Services, has a piece in Friday’s growthbusiness.co.uk titled, “The UK Bribery Act One Year On.”  In this article, Middup “… looks back on the first year of the UK Bribery Act to see if the British perception of corrupt practice has changed.”

Debit and credit – – David Albrecht

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Gwen Jorgensen is the Olympic Accountant.  A tax specialist at Ernst & Young, Milwaukee, she will represent the USA in Women’s Triathlon at the 2012 Olympics.

I’m embedding two new videos that reveal more about Gwen.

The first video, “On Triathlon Sportsmanship,” features Gwen talking about the community of triathletes.  She mentions the support that each competitor has for the others.  [After playing the video no YouTube, use your browser’s back button to return to The Summa.]

The second video, “Born to Ride,” shows Gwen talking about training for the biking aspect of the triathlon. She also talks about moving to Minneapolis.

Debit and credit – – David Albrecht

Want more of The Summa? Sign up to receive email notification of posts.  And please follow me on Twitter (@profalbrecht).

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