Ernst & Young tightropes between audit, advocacy [Reuters]
Corporate audit giant Ernst & Young operates a lobbying firm in Washington, D.C., that has been hired in recent years by several corporations that were at the same time E&Y audit clients, prompting two senior lawmakers to demand closer regulatory scrutiny. Amgen Inc (AMGN.O), CVS Caremark Corp (CVS.N) and Verizon Communications Inc (VZ.N) have ongoing lobbying contracts with Washington Council Ernst & Young, an E&Y unit, while also using the audit firm to review the corporations' books, according to documents reviewed by Reuters. The same arrangement occurred in the past with E&Y, its lobbying unit and AT&T Inc (T.N), Fortress Investment Group LLC (FIG.N) and Transocean Ltd (RIG.N), records show. Those lobbying contracts ended between 2006 and 2011. U.S. rules on "auditor independence" include one that bars auditors from serving in an "advocacy role" for audit clients. The rule is focused on legal advocacy, such as providing expert witness testimony, but several accountants said the general prohibition on advocacy may cover lobbying, as well. The rules, which were beefed up nearly a decade ago after the Enron-era accounting scandals, are designed to ensure auditors are impartial when they review clients' books.
Diamond Says Two Quit Board [WSJ]
The former chief executive and chief financial officer of Diamond Foods Inc. resigned from the board, ending their formal roles at the snack company following accounting irregularities. The one-time walnut growers' cooperative dismissed CEO Michael J. Mendes and CFO Steven M. Neil from their executive positions last month after an internal probe found it had wrongly accounted for payments to walnut growers and would have to restate financial results for two years. The two executives remained on the board as they negotiated terms of their exits.
MF Global Still Set to Pay Bonuses [WSJ]
Three top executives of MF Global Holdings Ltd. when it collapsed could get bonuses of as much as several hundred thousand dollars each under a plan by a trustee overseeing the securities firm's bankruptcy case, people familiar with the matter said. Louis Freeh, the former Federal Bureau of Investigation director now in charge of unwinding what is left of the New York company, is expected to ask a bankruptcy-court judge as soon as this month to approve performance-related payouts for the chief operating officer, finance chief and general counsel at MF Global, these people said. All three executives kept their jobs after the company's Oct. 31 failure in order to help Mr. Freeh untangle the firm's assets and maximize payouts to creditors.
Grumpies: "The business enterprise j2 Global Communications (JCOM) in its first quarter 2011 filing made an accounting change and called it a change in estimate. As several observers have noted, what the Company called a change in estimate is really an accounting error. What we would like to know is when will the SEC take JCOM’s managers to the woodshed and call an error an error. Gradient Analytics may have been the first to report this anomaly. In its November 21, 2011 report, it gave JCOM an earnings quality grade of “F” (boy, were they grumpy or what?). In part, this failing grade was due to the Company’s mislabeling an error as a change in estimate. Basically, JCOM through transparency right out the window."
