Category: EY

PCAOB Bans Former Auditors From Faking the Audit Trail For the Near Future

The PCAOB has banned former Ernst & Young partner Peter O’Toole from associating with a PCAOB-registered firm for the next three years and fined him $50,000 for his part of a 2009 scheme to fake audit paperwork. E&Y removed O’Toole from the audit engagement team in June of 2010 and canned him several months later in September. The three year ban from audits is the longest bar that the PCAOB has imposed on a partner of a Big 4 accounting firm to date.

“These actions threatened to undermine the integrity of PCAOB inspection processes, and the ability of the Board to discharge its mandate to inspect the auditors of public companies,” said James R. Doty, PCAOB Chairman in a statement. “The Board moved swiftly to address this conduct, having commenced litigation against these respondents within seven months of learning of their conduct. I commend the Board’s Division of Enforcement and Investigations for its timely and effective work,” he added.

The PCAOB has also banned Darrin Estella from working with a PCAOB-registered firm for two years in connection with the improper creation, addition, and backdating of audit documentation in this case. Estella was a senior manager with E&Y’s Boston office and also let go in September of 2010.

The Board found that, shortly before a PCAOB inspection of an E&Y audit, O’Toole and Estella — acting with O’Toole’s knowledge and authorization — created, backdated, and added a document to the audit working papers that related to the most significant issue in that audit. The Board also found that O’Toole authorized other members of the audit engagement team, including Estella, to alter, add, and backdate other working papers in advance of the PCAOB inspection.

Additionally, the Board found that O’Toole and Estella provided a written document to PCAOB inspectors in which E&Y represented to the Board that no changes had been made to the audit working papers following the documentation completion date for the audit. Neither O’Toole nor Estella ever disclosed to the PCAOB inspectors that, in fact, the working papers were altered after the documentation completion date and shortly before the inspection.

The Board found that O’Toole and Estella’s actions violated PCAOB Rule 4006, which requires cooperation with Board inspections, as well as PCAOB Auditing Standard No. 3, which governs audit documentation.

The PCAOB has not released the name of the company involved, who hired E&Y as  independent auditor in 2002. E&Y expressed an unqualified opinion on the company’s September 30, 2009 financial statements, which led to notice by the PCAOB that an inspection of the unknown company’s audit was being performed on March 30, 2010. The partner, senior manager and manager on the engagement were given notice on March 31, 2010. The inspection fieldwork was set to begin on April 19, 2010.

This comes on the heels of an earlier PCAOB decision which censured 27-year-old Jacqueline Higgins for her part in the scheme. Word is she has since taken a job with McGladrey’s Boston office (unconfirmed rumor), who could probably use the help.

Comp Watch ’11: Ernst & Young Comp Discussions Start Today

We’ve received several short, anxious emails (presumably all from Uncle Ernie’s nervous camp) tipping us off to the fact that E&Y comp discussions are going down this week, so it must be true. Of course, this post is useless without actual comp numbers, which we’re sure you’ll give us as soon as you have your sit-downs.

Hi Going Concern –

To give you heads up, E&Y comp and promotions dicussions [sic] are happening this week (they’re happening today in my office). Perhaps it’s a good time to open the new thread on the topic.

Cheers,
E&Yer

Great, so does this mean the Ohio and Michigan crews have already packed up and are ready to bail if they get anything less than whatever it was they are holding out for?

Rumors so far are that raises will be in line with last year’s, which were not at all disappointing considering that we are still (not technically) in a recession, not to mention all that Lehman drama the E&Y lawyers are still hashing out. Too soon? Anyway, as usual, you’re welcome to entertain each other with disparaging comments about the size of your, er, comp packages until we hear news on actual numbers.

Update: Looks like some pretty good numbers are rolling in but please, for the sake of your fellow EY brethren, if you want to share your comp info, be sure to at a minimum include where you are (general metro or region is fine), what service line you are in, your rating (hint: this is a number) and, of course, the actual new pay and bonus number (if any).

Ernst & Young Is Really Wishing They Hadn’t Blown Off That Lehman Brothers Whistleblower

FT Alphaville found this notable quote from District Judge Lewis Kaplan’s opinion (whole thing after the jump):

The TAC alleges that Lee told E&Y in June 2008 “that Lehman moved $50 billion of inventory off its balance sheet at quarter-end through Repo 105 transactions and that these assets returned to the balance sheet about a week later.” Assuming that is so, E&Y arguably was on 308 notice by June 2008 that Lehman had used Repo 105s to portray its net leverage more favorably than its financial position warranted, a circumstance that could well have resulted in the published balance sheet for that quarter being inconsistent with GAAP’s overall requirement of fair presentation. Accordingly, the TAC adequately alleges that E&Y misrepresented in the 2Q08 that it was “not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles” notwithstanding Lee’s disclosure to it.


“Lee” you may remember is Matthew Lee Lee, the Senior VP for Global Balance Sheet and Legal Entity Accounting who also said this about E&Y’s reaction to his warning on Repo 105:

They certainly didn’t support it. On the Repo 105 issue, they knew about it; they did not appear to know that the number was so large.

Ouch.

lehmanruling

Comp Watch ’11: Rumors of Imminent Exodus at Ernst & Young Has Some Perplexed

This just in:

I have been talking to a variety of people at E&Y from several offices in Ohio and Michigan. The word from them is that there is going to be a significant movement of people once compensation info is passed out. It’s kinda conflicting since the rumor is that raises should be around what they were last year. Not sure what to make about it.

As you recall, last year’s raises and bonuses at Ernst & Young were competitive with PwC, which came as a pleasant surprise to everyone at Black and Yellow but understandably this rumor has our tipster in a flummox. Of course, this could be limited to the Ohio/Michigan area but it’s worth seeing what the Turley’s Troops in other areas are hearing. Share below.

Ex-Ernst & Young Partner Trades Tech Companies for Cuddlesome Creatures

The Oakland Tribune shares this charming story of an accountant who discovered her talents would be more appreciated in helping animals:

Like many people who love animals, Sue James dreamed of becoming a veterinarian when she was a child.

“I looked into going to vet school but my parents, they wanted me to pursue a more traditional career,” said James, a Danville resident who grew up in a house in New York state where the family pets included dogs, rabbits — even a monkey.

After a long stint in the corporate world, James found an outlet for her lifelong love of animals at Tri-Valley Animal Rescue, an all-volunteer group founded in 1992 with a mission to prevent the unnecessary euthanasia of shelter animals.

Uncle Ernie gets a badass plug in the next bit:

She started volunteering in 2005 as she was winding down a long and successful career at Ernst & Young. There, she was a partner who oversaw audit work for some of Silicon Valley’s leading high-tech companies. Today, she serves on the boards of Yahoo, Applied Materials and Coherent.

Working at Ernst & Young, she learned the importance of teamwork to meet the needs of clients. That focus also carries over to her volunteer work. “It’s about the cats and dogs,” she said. “But also, for me, it’s how can we work effectively as a team.”

It makes sense that she’d end up at the shelter; from what I hear, actual auditing isn’t much different.

By the way, she’s 65. She holds a bachelor’s in math from Hunter College, New York (1967) and bachelor’s in accounting from San Jose State (1975). She taught math and science in junior high and high school in New York state from 1967-69, worked in San Jose office of Ernst & Young starting in 1975, was named partner in 1987, retired in 2006, then consulted for the company through 2009.

Promotion Watch ’11: Ernst & Young Admits 548 New Partners Worldwide

Still a little perplexed that I have to find this out via press release but I understand that at least some of you are beating off clients…

with a stick.

Jim Turley, Chairman and CEO of Ernst & Young says, “Building the next generation of partners to lead our business is vital to our future. This year’s marked increase in numbers reflects our ongoing commitment to excellence and our confidence in the future.”

John Ferraro, Chief Operating Officer of Ernst & Young says, “These admissions are the result of a rigorous selection process and recognizes the significant contribution of each individual to our success. This is a strong vote of confidence in the leadership potential of these outstanding individuals.”

Congrats to the all the new partners at E&Y!

Comp Watch ’11: Someone at Ernst & Young Wasn’t Too Discreet with Sensitive Info on Their Commute

From the mailbag:

Happened to be sitting behind someone on my NYC commute this week who was reading a deck (in font large enough for me to read) on EY’s salary ranges etc. Didn’t see any $ numbers and most was hard to see without context or the full page but I did see this:

(I don’t know ey terms – apr = annual performance rating?)

APR 3 4 5
S. Mgr 1% 2% 3%
Mgr 2% 3% 4%

Our tipster stated that the percentages were supposed to represent “minimum raise.” Hard what to make of this as rumors have been all over the board from “They told us not to have very high expectations,” to ” Per my discussions with an Office Managing Partner and a National Practice Leader …. raises should be close to (if not the same) as prior year.” But considering there’s an expensive legal battle on the horizon, maybe this isn’t so crazy? Discuss.

(UPDATE) Ernst & Young Auditor Area Man Takes His Crush for Co-worker Ernst & Young Auditor to Craigslist Missed Connections

Don’t you just love missed connections? Maybe you’re more of a casual encounters person but there’s something to be said for someone that is experiencing such infatuation that dropping a post on Craiglist seems like the best thing to do. Of course, it’s another thing entirely when you are infatuated with someone at work and you conclude that your best way to tell them that they are the most beautiful creature on Earth is by posting on missed connections. Apparently, UPDATE: some dude crushing on an Ernst & Young auditor did just that.

Dating Fails: Dating, Breakup, Boyfriend, Girlfriend - Office Romances Don't Count Online, Right?
see more

Okay, a few notes:

1. For a lot of reasons, personal and professional, there’s no way I can say anything to you. – What exactly are the “personal” reasons? You can’t speak in coherent sentences? You have awful body odor? You’re actually a serial killer? As for “professional” reasons, we all know that auditors are banging auditors all over the place (SEE UPDATE BELOW), so if you’re simply saying that this can’t happen because it’s against your professional morals then fine but other people around you are getting busy and you will not.

2. I can’t believe you don’t hear that all the time. You probably do. – You’re right. She probably does hear it all the time. But not from anonymous people on the Internet.

3. I wish I could tell you and not come across as a sleaze! – You’re not “coming across,” broski. You’re already there.

This was posted in NYC (expired now) so maybe we can track this guy down and help him with his game.

UPDATE:
After reader input and discussing it with my partner in crime, it’s clear that this is a client leering at the E&Y auditor and AG and others are postulating that our Craiglist creeper is either married or in a committed relationship. If this is the “personal reasons” he spoke of, it’s far less interesting and funny than some kind of social anxiety disorder that renders him a stuttering love-sick fool. But it does begs several societal questions among them: 1) does posting a missed connection constitute cheating? or 2) do we applaud his self-control (until he gets home of course). Discuss.

Are Ernst & Young Employees Looking Forward to Their Performance Discussions?

Since this feels like one of those days where everyone is at a ball game or is so hung over that they can’t operate their email, I’ll share the latest news from the mail-cum-money bag:

@EY – Just got an email saying we need to meet with our counselors before 7/31 to discuss annual review. I doubt any comp info though.

Even if these chats don’t involve any numbers, they may be useful in one of two ways: 1) It gives cranky employees the opportunity to fly off the handle because this last busy season was a special kind of personal hell and that no amount of money can possibly make up for that. or 2) It may be the perfect time to inform counselors about what kind of numbers are being thrown around at another firm who the Black Yellow had no problem keeping pace with last year.

Smiling and nodding works too, if that’s more your speed.

Ernst & Young Auditor Wants to Give a Partner an Earful About Comp Even If He Receives a ‘Very Generous’ Raise

Last week, we tried to get the ball rolling on Ernst & Young compensation rumors and while some may chalk up the lack of chatter to “PwC sticker shock,” others claim this is simply standard operating procedure. If you remember last year, eventually Ernst & Young reported some impressive raises that kept pace with P. Dubs but one of Turley’s troops is expecting the worst this year and would like to give a partner a piece of his mind. Unfortunately, he isn’t sure how to do it:

Hello,

By way of introduction, I am a loyal reader of going concern as well as a big four slave in the audit practice. Slavery had begun four years ago at EY and with all the compensation talk going on at other big four firms, I can’t help but to think –

What is a tactful way of telling a partner during the comp talk, “well thank you for that oh so very generous double digit percentage raise (assuming if it’s even double digit), but I am still unhappy because even after this supposed raise, you are still not paying me jack for the amount of contribution and commitment that you demand from me.”

As noted above, I’m a second year senior from an east coast office and my base is still not breaking mid-60s. Seriously, what the f___?

I will be forever grateful if you post my question up for discussion. Thanks so much!!!

Yours,

Angry EY audit senior

There are various directions we can take here so I’ll try to cover a few options before turning it over to you all.

A. Start off with a variation of, “Look, I’m an ungrateful, bitchy auditor. I also have unrealistic expectations and an inflated notion of my self-worth. I’d really appreciate an explanation as to how you can reconcile these traits to this paltry 10-15% raise.”

B. Continue with the slavery narrative.

C. Start questioning leadership at every turn, from challenging Andrew Cuomo to rumored twisting of Senators’ arms. “If this is the type of firm your running, yada yada yada.”

D. Simply ask if E&Y’s raises will beat PwC’s.

Now you may not think these are “tactful” ways to have this conversation but he did sign, “Angry EY Audit Senior.” If I tried to reason with this person, I’d be doing him a disservice. And when is honesty ever not tactful? If you sugarcoat your frustration, the partner will assume you’re a pushover like everyone else. My guess is most partners want you to give it to them straight. If you’re a performer (and something tells me you think you are) than this partner doesn’t want to lose your talent.

Having said all that, not everyone can muster up the courage to ditch the filter in these meetings. If you’ve got better more practical ideas than what I’ve listed, feel free to bestow your sage advice below.

Comp Watch ’11: Ernst & Young Keeps ‘Em Waiting

If I seemed impatient about hearing from the Black and Yellow, it’s because I was. Fortunately, someone answered the call:

As of now, we haven’t heard ANYTHING regarding raises/bonuses etc. On our performance management internal website the status of my annual review just changed from “Leadership Review/Roundtable” to “Release to Compensation” so hopefully we will be getting some news soon!

So, no news is…news, isn’t it? Last year, we started hearing Ernst & Young compensation rumors around the 15th and here we are, one week from our nation’s birthday and hardly a peep. Someone buy a partner a happy hour beer tonight or something, wouldja? Keep us updated.

(UPDATE) Can Anyone Make Sense of Ernst & Young’s Hiring Numbers?

I’ve been out of the numbers game for awhile now but for the life of me, I can’t figure out just how many people Ernst & Young will be hiring off campus for this year. Or is it last year? The firm put out a press release yesterday that states that it “will hire approximately 5,000 students from campuses across the US in the 2010-2011 academic year.” That’s all fine and good but it’s different from the report in CNN back in March that we told you about that said “It’s looking to hire 7,000 employees from college campuses — 4,500 full-time and 2,500 interns […] in 2011.”


That report also stated that “campus recruits are up 20%,” but yesterday’s press release said “campus hiring [increased] 25 percent from last year.”

All told, E&Y and the rest of the Big 4 are hiring lots of people but the numbers don’t quite add up. The nice folks at E&Y are trying to help me out, so I’ll report back when I’ve got some answers.

UPDATE: I’ve been informed by an E&Y spokesperson that “numbers referenced in the release are for the US, whereas the numbers cited in the Fortune article are for the Americas.” To clarify, the “Americas” includes the U.S., Canada, Mexico, Central America, South America, Bermuda, the Bahamas, the Cayman Islands and the Caribbean.

[via Ernst & Young]