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(South China Morning Post)   Ernst & Young, the accountants who signed off on Wirecard's books for a decade, say they were victims of an 'elaborate' fraud. 'It's not our fault if, as accountants, we can't count money.'   (scmp.com) divider line
    More: Dumbass, Wirecard's auditors EY, logo of Ernst, New York City, Audit, Logo, Auditing, SCMP Group, Computer file  
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502 clicks; posted to Business » on 26 Jun 2020 at 10:05 AM (7 days ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



30 Comments     (+0 »)
 
View Voting Results: Smartest and Funniest
 
2020-06-26 8:32:17 AM  
Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.
 
2020-06-26 8:35:01 AM  
The big accounting firms are all about selling as many services as they can.  If the books get audited properly, you can always pay a bit extra to get a more complex audit that yields far different results.  In fact, if you sign on for ENOUGH services, the auditors can actually become not just blind, but deaf as well.

It's very innovative.
 
2020-06-26 8:38:27 AM  
 
2020-06-26 8:47:37 AM  
Auditors specifically say that their job isn't to discover fraud.

They don't look for it, they don't want to look for it.

They just want to be provided with some kind of evidence for what you claim on your financials. Nothing more, nothing less
 
2020-06-26 9:34:54 AM  
It's 2020 for heaven's sake. Nobody is responsible for anything anymore.
 
2020-06-26 9:40:58 AM  
Maybe they are using Arthur Andersen's old 'how-to' books?
 
2020-06-26 9:50:12 AM  
Silly audit story, from my few days as an auditor. My professional qualification dictated that I spend 12 weeks as an auditor. I got sent to one job, where I was told to ask a list of questions to the Financial Controller (or someone like that, I don't remember who it was).

Anyway, I asked the questions and the answers were terrible and I pressed them as to why they weren't doing simple things like cash reconciliations more than once a year.

Well I very quickly got sent home from that job and did the rest of my 12 weeks in the office. Turns out I was just meant to tick the box that said I asked the questions, I wasn't meant to give a damn about the answers.

In my experience on the receiving end of audits, they haven't gotten any better in the last 15 years.
 
2020-06-26 10:06:43 AM  
Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.
 
2020-06-26 10:23:21 AM  

offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.


Marcus Aurelius: The big accounting firms are all about selling as many services as they can.  If the books get audited properly, you can always pay a bit extra to get a more complex audit that yields far different results.  In fact, if you sign on for ENOUGH services, the auditors can actually become not just blind, but deaf as well.


Both of these SO much! Cash (cold hard, in the bank cash) is the easiest part of an audit. Take the bank statements, adjust for timing (checks that haven't cleared yet, deposits that hit earlier than expected), then compare to the financial statements. Off by a few bucks- no one care. Off by a few thousand- check the controls and make sure something isn't being abused. Off by a million- some serious 'spaining to do. Off by a billion- Major problems
 
2020-06-26 10:24:34 AM  

Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.


1.  Determining auditing by proxy?  Sounds like fun.
2.  Anything done by proxy will still be controlled by institutional "investors" who are more interested in getting seats on the BoD than any fudiciary duty.

Other than that it is a great idea.  You just can't put it into place without turning the entire US corporation system on its head (something it desperately needs).
 
2020-06-26 10:30:21 AM  
I worked for a company about a decade ago that went under/ CEO/CFO ended up in prison.  Guess where they worked before than came to this company?   Guess who was the external auditors?

https://www.cfo.com/accounting-tax/20​0​8/09/cooked-books-pasta-company-execs-​plead-guilty/
 
2020-06-26 10:31:11 AM  

offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.


My favorite accounting class was Fraud Investigation.  We looked at Crazy Eddie, had an investigator from the CT Lottery come in to share her experiences, and touched on Enron (was happening while taking the class). It was an elective course that was held irregularly, and when the professor asked if it should be available every year the class strongly agreed it should be.  Then I graduated and 2008 did what it did.

Fun times.
 
2020-06-26 10:53:05 AM  
Now 70 cents a share.  Just over a week ago, it was trading at 60 dollars a share.  Ouch.
 
2020-06-26 10:59:11 AM  
Huh, its almost like a government entity with weight and power behind it should be in charge of auditing companies on a yearly basis or something
 
2020-06-26 11:27:37 AM  

lifeslammer: Huh, its almost like a government entity with weight and power behind it should be in charge of auditing companies on a yearly basis or something


There is, in the US they're called the IRS. All they care about is the tax, not customers, investors, employees, etc. Oh, and the rules for what counts for the IRS as income is different than for the SEC.
 
2020-06-26 11:30:28 AM  

Gubbo: Auditors specifically say that their job isn't to discover fraud.

They don't look for it, they don't want to look for it.

They just want to be provided with some kind of evidence for what you claim on your financials. Nothing more, nothing less


As a government accountant I'm getting a kick...

We get audited every year by another state agency.  They usually find something they want to change or have a problem with in various other agencies.

I find them quite annoying, always asking questions and not understanding everything immediately.

/kinda sarcasm
 
2020-06-26 11:34:17 AM  

Opacity: offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.

Marcus Aurelius: The big accounting firms are all about selling as many services as they can.  If the books get audited properly, you can always pay a bit extra to get a more complex audit that yields far different results.  In fact, if you sign on for ENOUGH services, the auditors can actually become not just blind, but deaf as well.

Both of these SO much! Cash (cold hard, in the bank cash) is the easiest part of an audit. Take the bank statements, adjust for timing (checks that haven't cleared yet, deposits that hit earlier than expected), then compare to the financial statements. Off by a few bucks- no one care. Off by a few thousand- check the controls and make sure something isn't being abused. Off by a million- some serious 'spaining to do. Off by a billion- Major problems


Materiality depends on how much money is involved.

I have certain accounts where if the amount is under 100K a year end entry isn't needed.  Then some smaller accounts an entry is needed for $500.

/lame accounting story
 
2020-06-26 11:36:12 AM  

kittyhas1000legs: offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.

My favorite accounting class was Fraud Investigation.  We looked at Crazy Eddie, had an investigator from the CT Lottery come in to share her experiences, and touched on Enron (was happening while taking the class). It was an elective course that was held irregularly, and when the professor asked if it should be available every year the class strongly agreed it should be.  Then I graduated and 2008 did what it did.

Fun times.


That does sound like a fun class.

I only had a basic auditing course and I hated it.  Decided then I'd stick with accounting and not go into auditing.

I should look and see if I can take a Forensic Accounting course just for fun.
 
2020-06-26 11:45:18 AM  

TheFoz: kittyhas1000legs: offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.

My favorite accounting class was Fraud Investigation.  We looked at Crazy Eddie, had an investigator from the CT Lottery come in to share her experiences, and touched on Enron (was happening while taking the class). It was an elective course that was held irregularly, and when the professor asked if it should be available every year the class strongly agreed it should be.  Then I graduated and 2008 did what it did.

Fun times.

That does sound like a fun class.

I only had a basic auditing course and I hated it.  Decided then I'd stick with accounting and not go into auditing.

I should look and see if I can take a Forensic Accounting course just for fun.


Forensic accounting is one of those things that can be really interesting (the meeting I had where I was told to in no way ask any questions to the obvious IRA person, this was up on the border) or incredibly boring, like trying to work out what percentage of sales Pepsi lost out on because the store hadn't followed the guidelines and had put their refrigerator 2 feet from where it should have been.
 
2020-06-26 11:51:43 AM  

Opacity: Both of these SO much! Cash (cold hard, in the bank cash) is the easiest part of an audit. Take the bank statements, adjust for timing (checks that haven't cleared yet, deposits that hit earlier than expected), then compare to the financial statements. Off by a few bucks- no one care. Off by a few thousand- check the controls and make sure something isn't being abused. Off by a million- some serious 'spaining to do. Off by a billion- Major problems


Subsidiaries, especially through a Delaware holding company, are treasure trove of tax avoidance schemes.  You can move profits virtually at will to any jurisdiction you operate in, and make it all pass the sniff test.  And that's just the legal stuff.
 
2020-06-26 12:42:28 PM  

offacue: Read the story about how Crazy Eddie was all just a scam. Written by Sam Antar, cousin of 'Crazy" Eddie Antar and one of the main perpetrators.  Scamming auditors is easy.


I just plowed through that whole thing.  Damn.
 
2020-06-26 12:44:43 PM  

Opacity: lifeslammer: Huh, its almost like a government entity with weight and power behind it should be in charge of auditing companies on a yearly basis or something

There is, in the US they're called the IRS. All they care about is the tax, not customers, investors, employees, etc. Oh, and the rules for what counts for the IRS as income is different than for the SEC.


When you need one set of books for the IRS, one set of books for the SEC, one set to operate, it becomes much more straightforward to have another set of books for the auditors (they should be checking all of them, but that's not what they are contracted to do.  They are contracted to check a box and check a box is what they will do.
 
2020-06-26 1:41:57 PM  

Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.


Shareholders do hire the external auditors. This is typically voted on during the yearly shareholders meeting.
 
2020-06-26 2:17:36 PM  
So their auditing is about as good as their IV&V.  What a company.  Jesus.
 
2020-06-26 2:32:33 PM  
The group I was working on for Y2K work got forced into a marriage with E&Y. Around the office they were referred to as "Ernie and the Youngsters"

They delivered weekly reports printed on a couple cartons of greenbar. They wouldn't supply the info electronically. Thanks pals.
 
2020-06-26 2:39:40 PM  

TedCruz'sCrazyDad: Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.

Shareholders do hire the external auditors. This is typically voted on during the yearly shareholders meeting.


I probably should have paid more attention in Corporate Governance.  That was my least favorite class.
 
2020-06-26 5:23:42 PM  

Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.


It's hilarious that people still trust these people (after Enron and the housing market crash) rather than making their own external judgements.
 
2020-06-26 9:23:50 PM  

Rapmaster2000: If the shareholders hired the firm, you'd see a lot more fraud.


Shareholders do not want to hear about any fraud.
Short sellers are the ones that usually uncover fraud, but they can't be trusted either.
 
2020-06-26 11:17:15 PM  

farkeruk: Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.

It's hilarious that people still trust these people (after Enron and the housing market crash) rather than making their own external judgements.


Agree. Trust in the average American is the way to go to back our complex financial system. Sort of like the average Joe critiquing a QB for not winning the Superb Owl.
 
2020-06-26 11:23:13 PM  

farkeruk: Rapmaster2000: Accounting firms are hired by companies to audit them.  There's an inherent conflict of interest.  If the shareholders hired the firm, you'd see a lot more fraud.

This is the same problem with bond ratings.  They're all over-rated.

It's hilarious that people still trust these people (after Enron and the housing market crash) rather than making their own external judgements.


Yes, let's trust the average Joe. It is not like MNCs, global politics, complex financial instruments and supporting US economic backbone is easy.

Perceived conflicts arise everywhere. Doctors get paid by big pharma, dentists for root canals, lawyers getting paid arguing out of both sides of their mouth, and you do not succeed because your boss is a moron.

Yes, complain about one of the most trusted professions for which your job, retirement, and the US economy relies. A few bad eggs does not an entire system make.
 
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