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(Bloomberg)   Accounting giant Deloitte on the company HP is now accusing of having defrauded HP of $8.8 billion by falsely reporting non-existent sales: Hey we looked at their books a year ago and they looked fine to us   (bloomberg.com) divider line 43
    More: Scary, Deloitte LLC, Hewlett-Packard, Autonomy Corp., mistakes, civil litigation, software company, Hey, National Occupational Standards  
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2468 clicks; posted to Business » on 21 Nov 2012 at 1:17 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-11-21 11:26:00 AM
I wouldn't trust Deloitte to give me change at the Dollar store.

In Delaware, where they don't have sales tax
 
2012-11-21 11:35:01 AM
I just woke up, and the first headline I read was this one. I think I'm going to go back to bed and try again later.
 
2012-11-21 12:12:14 PM
if you didn't look any further than the financial statements of a company before paying $10B for a company, you deserve what you get.
 
2012-11-21 12:51:22 PM

thomps: if you didn't look any further than the financial statements of a company before paying $10B for a company, you deserve what you get.


Not only that, but the last audited statements were for 12-31-10.
 
2012-11-21 01:28:12 PM
As for the fact that the books were in crayon, well we weren't hired for the due diligence stuff.
 
2012-11-21 01:31:08 PM

thomps: if you didn't look any further than the financial statements of a company before paying $10B for a company, you deserve what you get.


Still, what on earth is the point of having a giant accounting firm like Deloitte audit books if they can't spot accounting fraud THIS obvious?
 
2012-11-21 01:36:16 PM

thomps: if you didn't look any further than the financial statements of a company before paying $10B for a company, you deserve what you get.


Not only that, the guy doing the deal on the other side was a known crook who swindled people during the dot-com boom. Got arrested, hung jury, found guilty. Ended up getting no jail time.
 
2012-11-21 01:47:46 PM

Magorn: thomps: if you didn't look any further than the financial statements of a company before paying $10B for a company, you deserve what you get.

Still, what on earth is the point of having a giant accounting firm like Deloitte audit books if they can't spot accounting fraud THIS obvious?


I haven't read that much in detail about this, but if the last audited statements were dated 12/31/10 and the company was sold to HP in August of 2011, it's possible that the fraud took place between those dates. You don't need systematic and long-running fraud to hide losses -- Lehman Brothers was able to pull off some accounting maneuvers to hide something like $30 Billion in toxic assets in the days before it filed its last financial statement. In fact it's possible that Autonomy solicited HP to buy them because it was bleeding cash. In any case HP is hugely negligent for not poring over Autonomy's books before forking over $10 Billion dollars to acquire it.
 
2012-11-21 02:04:16 PM

stratagos: I wouldn't trust Deloitte to give me change at the Dollar store.

In Delaware, where they don't have sales tax


With all of my experiences with Toilet and Douche, i agree.
 
2012-11-21 02:11:28 PM
Okay, now my vision is clearer and I can understand words again.
 
2012-11-21 02:22:04 PM
The big accounting firms get a lot of money "consulting" for corporations. When it comes time for the audit, they act accordingly. Kind of the same way Moody's rates securities - the higher the rating, the more business they get.
 
2012-11-21 02:50:13 PM
Gartner ranks Deloitte as the worldwide leader in consulting.

This is like Ted Bundy proclaiming Jack the Ripper as the best serial killer of all time.
 
2012-11-21 03:16:11 PM
Do auditor's still send out the a/r verification letters? There is only so many places you can hide $10B in sales.
 
2012-11-21 03:29:47 PM
My friend works for Deloitte. Ill be sure to give him some shiat about this just for fun.
 
2012-11-21 03:35:26 PM

Relatively Obscure: Okay, now my vision is clearer and I can understand words again.


I'll bet that headline still hurts your brain.

/I gave up on it.
 
2012-11-21 04:28:41 PM

jjorsett: As for the fact that the books were in crayon, well we weren't hired for the due diligence stuff.


We looked at the books, they had a 2 covers and pages in between, seemed legit. You want us to read all that shiat? Gonna cost you way more.
 
2012-11-21 04:47:42 PM

DjangoStonereaver: Gartner ranks Deloitte as the worldwide leader in consulting.

This is like Ted Bundy proclaiming Jack the Ripper as the best serial killer of all time.


To be fair, he WOULD know a thing or two about killing and dismembering young women.
 
2012-11-21 05:00:54 PM
To paraphrase Romney on his taxes... "It was all legal".
 
2012-11-21 05:19:05 PM
www.mikemorley.com
 
2012-11-21 05:31:10 PM

Mad_Radhu: DjangoStonereaver: Gartner ranks Deloitte as the worldwide leader in consulting.

This is like Ted Bundy proclaiming Jack the Ripper as the best serial killer of all time.

To be fair, he WOULD know a thing or two about killing and dismembering young women.


If Gartner told me the sky was blue, I wouldn't believe them.
 
2012-11-21 05:45:27 PM

Swoop1809: My friend works for Deloitte. Ill be sure to give him some shiat about this just for fun.


Mine does to. He goes on Facebook and brags about all the money they spend on sending him all over to resorts and hotels all the time to talk up clients and how he's currently parked in New Orleans working on the affordable health care act. He raves on and on about how awesome the company is. I just want to piss him off sometime and ask if he has actually googled the company to see just how dirty they are. They came under fire for this and for the crap they pulled in Canada recently. I hate to crush his dreams but it bugs me when people don't realize who they work for.
 
2012-11-21 06:10:20 PM
Swoop1809: My friend works for Deloitte. Ill be sure to give him some shiat about this just for fun.

Make sure to call it "toilette and douche", they love that.

// even if they dropped the "Touche" from their name :P
 
2012-11-21 07:17:04 PM
upload.wikimedia.org
www.riskglossary.com
Approve
 
2012-11-21 08:19:58 PM
Considering that the accounting firm in question has been charged with cooking the books for a few companies previously, and, when caught at it, used the whole "Look! Over there! PIGS ARE FLYING!" defense, I take *anything* they have to say with a 10lb bag of salt.
 
2012-11-21 08:21:21 PM
Auditors don't check that data is correct. They perform certain examinations to ensure that the methods that data have been counted and displayed are in line with established rules. Businesses, when they buy other businesses, are supposed to review things like actual money changing hands (called "non-legal due diligence").

It's not like when anything is wrong with numbers you blame the accountants. And, no, I am not an accountant.
 
2012-11-21 08:30:25 PM
As someone who has worked with the top auditors of MANY firms, I can honestly tell you that there is no more useless a service on earth than an auditor. The problem is that they do NOT understand the business, they do NOT understand how the financial system works and they most definitely couldnt find an apple in an orange basket.

And to any auditors on Fark. You should be ashamed of yourselves.
 
2012-11-21 08:59:07 PM

poisonedpawn78: As someone who has worked with the top auditors of MANY firms, I can honestly tell you that there is no more useless a service on earth than an auditor. The problem is that they do NOT understand the business, they do NOT understand how the financial system works and they most definitely couldnt find an apple in an orange basket.

And to any auditors on Fark. You should be ashamed of yourselves.


We need to return to the pre-depression days when companies weren't required to have their statements audited or to file with the SEC.

As always, regulations are useless. Right?
 
2012-11-21 09:29:26 PM
YTG,

Came here to say the same thing. AA was bad, but I am sure Accenture is completely above board.
 
2012-11-21 10:05:07 PM

KidneyStone: stratagos: I wouldn't trust Deloitte to give me change at the Dollar store.

In Delaware, where they don't have sales tax

With all of my experiences with Toilet and Douche, i agree.


Came in here to make sure someone used that insult. Leaving satisfied.

They're not very good at what they do, and tend to be hostile about it to boot. KPMG and even PWc are better.
 
2012-11-21 10:05:07 PM

swaxhog: Not only that, the guy doing the deal on the other side was a known crook who swindled people during the dot-com boom. Got arrested, hung jury, found guilty. Ended up getting no jail time.


I can't believe that companies as soon as they see Frank Quattrone on the other side of the table don't run screaming from the table.

Also I can't believe I'm going to praise Oracle: they saw through this obvious charade and passed on the deal.
 
2012-11-21 10:20:01 PM

mavrickatubc: Auditors don't check that data is correct. They perform certain examinations to ensure that the methods that data have been counted and displayed are in line with established rules. Businesses, when they buy other businesses, are supposed to review things like actual money changing hands (called "non-legal due diligence").

It's not like when anthing is wrong with numbers you blame the accountants. And, no, I am not an accountant.


Auditors have substantive procedures to test the various balances on the balance sheet. For cash, they will look at the bank statements. For AP, auditors will review vendor statements, review post-period invoices (timing), and send verfication letters. For AR, auditors will review contracts and send verfication letters.

It is nearly impossible to detect intentional fraud, but the firms substantive procedures should minimize the risk. From what I read in the article, $10B in sales were falsified, which means either cash or AR was mis-stated. Cash is harder to mis-state particularly since it is harder to kite checks now days. It is easier to mis-state AR, but the audit procedures should have been designed to minimize the risk. A $10B jump in AR would have raised all sort of red-flags as would a signficantly aged account. If the audit firm followed the proper procedures, they are probably in the clear.
 
2012-11-22 12:23:30 AM

poisonedpawn78: As someone who has worked with the top auditors of MANY firms, I can honestly tell you that there is no more useless a service on earth than an auditor. The problem is that they do NOT understand the business, they do NOT understand how the financial system works and they most definitely couldnt find an apple in an orange basket.

And to any auditors on Fark. You should be ashamed of yourselves.


I came through one of the big firms and the audit quality is shiat.

Nobody knows how to audit anymore, minimal substantive testing, total reliance on internal controls. Time budgets are brutal and expanding testing when you suspect a problem is unheard of. Just keep writing memos and doctoring the workpapers until you can rely on internal controls and be done with it.

The only bigger joke is the FASB - total standards overload. I promise that at least 50% of your audit fee it jump through hoops to comply with stupid standards that don't add a damn thing to the audit.

Actually.....most of the audit is to build a file to fend off the inevitable lawsuits for audit failures, and a good portion of the fee is to pay the insurance.

If you want a good audit, get a good local or regional firm. If you're so big you are forced to the big firms, make sure your D&O is paid up.
 
2012-11-22 12:35:35 AM
Remember teh Alamo?

Or 'Remember Arthur Andersen?'
Or 'Remember that Enron was massive fraud?'
 
2012-11-22 12:53:03 AM

Yankees Team Gynecologist: Approve


Came here for an Enron reference, leaving satisfied.

/My sister is a partner with D&T. Hope she loses out big time here.
 
2012-11-22 12:56:20 AM

poisonedpawn78: As someone who has worked with the top auditors of MANY firms, I can honestly tell you that there is no more useless a service on earth than an auditor. The problem is that they do NOT understand the business, they do NOT understand how the financial system works and they most definitely couldnt find an apple in an orange basket.

And to any auditors on Fark. You should be ashamed of yourselves.


Not all auditing firms are as cocky, arrogant, and useless as Deloitte.I'm not sure what kind of engagement they were contracted to do, but the problem at Autonomy would have been exposed by a simple reconciliation, much less the sampling methods that auditors employee. Something this big didn't just happen recently. I am guessing the HP's diligence team got a hold of Deloitte's work and included in their review. Farking retarded. How a company can acquire a $10B asset without examining basic AR and customer contracts is beyond me. I don't know what kind of liability Deloitte will face on this. If they just made crap up to get through it quick, they could have a problem.
Also, there is no such thing as a Due Diligence audit. That is just a term used for confirming all assets and liabilities are correct as stated on financial documents.
 
2012-11-22 06:56:58 AM
Why don't companies (like HP) make the accounting firms (like Deloitte) sign agreements when they do these looks at companies that if they fail, the accounting firm has to pay for the cost of the fraud?
 
2012-11-22 10:34:41 AM

Befuddled: Why don't companies (like HP) make the accounting firms (like Deloitte) sign agreements when they do these looks at companies that if they fail, the accounting firm has to pay for the cost of the fraud?


Because detecting fraud is extraordinarily difficult. If HP wanted the accounting firm to sign off that no fraud occurred, the fee that would be charged would have to be orders of magnitude higher, if they would do it at all.
 
2012-11-22 11:32:33 AM

minoridiot: mavrickatubc: Auditors don't check that data is correct. They perform certain examinations to ensure that the methods that data have been counted and displayed are in line with established rules. Businesses, when they buy other businesses, are supposed to review things like actual money changing hands (called "non-legal due diligence").

It's not like when anthing is wrong with numbers you blame the accountants. And, no, I am not an accountant.

Auditors have substantive procedures to test the various balances on the balance sheet. For cash, they will look at the bank statements. For AP, auditors will review vendor statements, review post-period invoices (timing), and send verfication letters. For AR, auditors will review contracts and send verfication letters.

It is nearly impossible to detect intentional fraud, but the firms substantive procedures should minimize the risk. From what I read in the article, $10B in sales were falsified, which means either cash or AR was mis-stated. Cash is harder to mis-state particularly since it is harder to kite checks now days. It is easier to mis-state AR, but the audit procedures should have been designed to minimize the risk. A $10B jump in AR would have raised all sort of red-flags as would a signficantly aged account. If the audit firm followed the proper procedures, they are probably in the clear.


This.

/CPA
//Big 4
///Not Deloitte
 
2012-11-22 11:50:09 AM

Debeo Summa Credo: Befuddled: Why don't companies (like HP) make the accounting firms (like Deloitte) sign agreements when they do these looks at companies that if they fail, the accounting firm has to pay for the cost of the fraud?

Because detecting fraud is extraordinarily difficult. If HP wanted the accounting firm to sign off that no fraud occurred, the fee that would be charged would have to be orders of magnitude higher, if they would do it at all.


Yep... audit standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Absolute assurance would be damn near impossible and, as you pointed out, cost a brazillion dollars.
 
2012-11-22 12:28:35 PM

jankyboy: minoridiot: mavrickatubc: Auditors don't check that data is correct. They perform certain examinations to ensure that the methods that data have been counted and displayed are in line with established rules. Businesses, when they buy other businesses, are supposed to review things like actual money changing hands (called "non-legal due diligence").

It's not like when anthing is wrong with numbers you blame the accountants. And, no, I am not an accountant.

Auditors have substantive procedures to test the various balances on the balance sheet. For cash, they will look at the bank statements. For AP, auditors will review vendor statements, review post-period invoices (timing), and send verfication letters. For AR, auditors will review contracts and send verfication letters.

It is nearly impossible to detect intentional fraud, but the firms substantive procedures should minimize the risk. From what I read in the article, $10B in sales were falsified, which means either cash or AR was mis-stated. Cash is harder to mis-state particularly since it is harder to kite checks now days. It is easier to mis-state AR, but the audit procedures should have been designed to minimize the risk. A $10B jump in AR would have raised all sort of red-flags as would a signficantly aged account. If the audit firm followed the proper procedures, they are probably in the clear.

This.

/CPA
//Big 4
///Not Deloitte


This again. Also, as mentioner earlier, the last financial audit was 2010. Auditors provide reasonable assurance. KPMG mucked up the due diligence.
 
2012-11-22 10:31:17 PM
Apparently, it wasn't the kind of audit that actually does anything but cash a giant check.
 
2012-11-23 12:19:23 AM
My mom was a consultant for Deloitte back when it was called Deloitte and Touche, and my uncle works for them currently, so I'm getting a kick out of this.
 
2012-11-23 03:37:41 PM

epyonyx: jankyboy: minoridiot: mavrickatubc: Auditors don't check that data is correct. They perform certain examinations to ensure that the methods that data have been counted and displayed are in line with established rules. Businesses, when they buy other businesses, are supposed to review things like actual money changing hands (called "non-legal due diligence").

It's not like when anthing is wrong with numbers you blame the accountants. And, no, I am not an accountant.

Auditors have substantive procedures to test the various balances on the balance sheet. For cash, they will look at the bank statements. For AP, auditors will review vendor statements, review post-period invoices (timing), and send verfication letters. For AR, auditors will review contracts and send verfication letters.

It is nearly impossible to detect intentional fraud, but the firms substantive procedures should minimize the risk. From what I read in the article, $10B in sales were falsified, which means either cash or AR was mis-stated. Cash is harder to mis-state particularly since it is harder to kite checks now days. It is easier to mis-state AR, but the audit procedures should have been designed to minimize the risk. A $10B jump in AR would have raised all sort of red-flags as would a signficantly aged account. If the audit firm followed the proper procedures, they are probably in the clear.

This.

/CPA
//Big 4
///Not Deloitte

This again. Also, as mentioner earlier, the last financial audit was 2010. Auditors provide reasonable assurance. KPMG mucked up the due diligence.


I'll ^This this also. I'm close to a CPA at a local firm here.

Only approximately 25% of fraud is found via external audit and those are usually the simple ones who didn't think their cunning plan all the way through.

Most fraud is discovered by someone within who blows the whistle on it.
 
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