Just a brief follow-up on the manager who received the disciplinary action handed down by the PCAOB on Monday.
We attempted to reach Jacqueline Higgins late yesterday at her office number in Boston, however we discovered that when we were transferred to her extension we simply bounced back to reception, who needless to say, was very confused about that phenomenon. After attempting to page Ms. Higgins, only then did the receptionist learn and then relay to us that Ms. Higgins was no longer with the firm.
We checked with Ernst & Young spokesman Charlie Perkins on this development and he confirmed that Ms. Higgins “will be leaving the firm at the end of the year.”
And lest there still be any confusion due to the carefully worded E&Y statement, the partner and senior manager in question have been dismissed from the firm.
We’ll keep you updated if we hear more from inside at the firm or if further action is taken by the PCAOB.
~Update 2 includes statement from Claudius Modesti, PCAOB Director of Enforcement and Investigations
Today in obscure accounting oversight board enforcement actions, an Ernst & Young Manager in the Boston office was censured by the PCAOB for repeated violations o y to Cooperate with Inspectors, and Auditing Standard No. 3 (“AS3”), Audit Documentation.
The violations occurred when 27 year-old Jacqueline Higgins “(1) added documents to the working papers without indicating the dates that documents were added to the working papers, the names of the persons preparing the additional documentation, and the reason for adding the documentation months after the documentation completion date; and (2) removed a document from the working
papers after the documentation completion date.”
The timeline goes like this: E&Y was given notice by the PCAOB that an inspection of the unknown company’s audit was being performed on March 30, 2010 and 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.
On April 5th, the three Ernsters began preparing for the inspection and that’s when problems started cropping up which led to more trouble. The order has the details:
First, Respondent reported to the Engagement Partner and the Senior Manager that a “Review Procedures Memorandum” was missing from the external working papers. The Engagement Partner and the Senior Manager directed Respondent to create and print out the missing document, and to backdate the document to November 30, 2009. The Engagement Partner and the Senior Manager directed Respondent to backdate her sign-off on this working paper to November 30, 2009, and to add this document to the external working papers.
17. Second, Respondent reported to the Engagement Partner that the tie-out of the financial statements contained in the external working papers was performed upon a pre-final set of financial statements. The Engagement Partner directed Respondent to remove this document from the external working papers, and to replace it with a newly created document which tied-out the final financial statements, and which the Engagement Partner directed Respondent to backdate to November 2009.
18. Third, Respondent reported to the Engagement Partner that the Average Forward Foreign Currency Contracts Calculation (“A3a Working Paper”) was missing from the external working papers. The Engagement Partner directed Respondent to gather the missing document, backdate it to November 2009, and add it to the external working papers.
19. Finally, Respondent reported to the Senior Manager that three checklists were missing from the external working papers. The Senior Manager directed Respondent to assemble the missing checklists as a single document (“HH6.8 Working Paper”) and to backdate her sign-off on this working paper to November 2009. The Senior Manager directed Respondent to add the document to the external working papers. The Senior Manager and Respondent reported to the Engagement Partner the facts and circumstances related to the creation of the HH6.8 Working Paper, and the Engagement Partner took no steps to cause the document to be properly dated, or to have it removed from the external working papers.
So those are the wonky details. Where this particular story is most interesting (in our opinion) is that Ms Higgins was, prior to this little mishap, on the fast track. According to the order, she graduated in May of 2005 and started with E&Y in September. She was promoted to senior associate in October of 2007 and then promoted to manager in October of 2009. Now, perhaps she was an audit-savant or perhaps not but in just over four years, she was a manager, which is a much quicker pace than usual.
Granted, she was still under the supervision of the senior manager and partner on the engagement but a young manager nevertheless. Now, you might be asking yourself, “what about the senior manager and partner? Are they getting their wrists slapped?” Conventional wisdom tell us, “absofuckinglutely” but the PCAOB isn’t saying. We were told by a spokesperson that the Board cannot comment on any other action related to this case.
As far as what a censure by the PCAOB actually entails, we were told that “It is an official reprimand from the PCAOB.” Some might call it a wrist slap but we’re damn sure you don’t want that in your file when you’re 27 years old. The action also states that Ms. Higgins was removed from the engagement in July 2010 and “at that time Higgins ceased participating in issuer audit engagements.”
Messages with E&Y spokesperson Charles Perkins and A message left with an attorney for Ms. Higgins were not immediately returned.
Ernst & Young has issued the following statement:
Our firm policy clearly prohibits persons from supplementing audit workpapers in circumstances like those described in the disciplinary order. When we determined that firm policy had been violated, we put the three individuals involved on administrative leave and subsequently separated the partner and senior manager. We have advised the PCAOB of these facts and have cooperated fully with the PCAOB throughout its investigation of this matter.
Based on the above, you might conclude that more disciplinary action will be coming from the PCAOB but like we said, they’re not talking.
UPDATE 2 – circa 3:30 pm: Claudius Modesti, PCAOB Director of Enforcement and Investigations, explained the seemingly light punishment in an email to Going Concern:
As to the censure, under the facts and circumstances, the censure is appropriate given Higgins’ relatively junior position on the audit team and her overall role in the conduct. We also considered the fact that she settled the matter without requiring the Board to commence litigation, which would have been nonpublic as required by the Sarbanes-Oxley Act.”
It was then explained to us that the PCAOB has never explained a disciplinary action in this way: “We also considered the fact that she settled the matter without requiring the Board to commence litigation, which would have been nonpublic as required by the Sarbanes-Oxley Act.”
If that’s not quite clear, consider this: It is significant because, had Ms Higgins acted in the alternative (i.e. not settled), litigation would have been necessary and no one outside of the PCAOB, Higgins, her lawyers and E&Y would have known about the proceedings. Granted, it’s fairly common for lighter disciplinary action to result from a settlement but it also makes sense from a PR perspective (not to mention, transparency and investor protection) if the PCAOB can actually announce that they are taking action against people who break the rules. Part of the challenge the Board has faced is convincing anyone that they have teeth.
It will be interesting now to see if the senior manager and partner follow the same track as Ms. Higgins and how the PCAOB will respond to their cooperation (or lack thereof).
China has everyone beat, no shocker there, but if you don’t count Sarah Palin’s real America the red, white & blue is #2!
Ernst and Young counts only perhaps half (or is it three quarters?) of the 300 million people in the US as “US”, by considering only those states that are doing anything about renewable energy, like California…The “US” excludes all the dirty states that lack renewable policy; states like Wyoming, Indiana, North Dakota, Kentucky, Oklahoma and so on.
You may have been under the impression that someone within E&Y was responsible for the lockdown, however, thanks to an enterprising E&Y employee, we now know who the keymasters really are:
I don’t work in the Jericho office, but got shipped out there for random clients for most of this summer. The bathrooms are in the common areas shared by all tenants of the building, so the keyed entry to the bathrooms is mandated by the building management, not EY (not that I’d put it past the partners to come up with something like this, though).
Also, while there are keys for each bathroom, there are also entry codes you can use instead. So you can grab one of the communal keys (kinda gross), or remember the terribly difficult four digit code (0001 if I remember correctly).
As a side note, I remember the admin mentioning that the original set of five keys for the men’s room was down to two. I’m wondering why someone would make off with these nasty over-sized germ farms.
Okay, so the missing keys aren’t news but what’s it going to take to get some extras made? And, again, who’s making off with the keys in the first place?
And while it’s good to know that the E&Y brass in Jericho aren’t actually the ones putting the clamp on the johns, would it kill them to spring for some private restrooms that non-E&Yers don’t have access to? It’s one thing to have to schlep to the front desk to get a key every time; it’s entirely another to be sharing a bathroom with the entire building. What is this, Penn Station?
Seriously, how much time and cost would it take to throw in some pots, sinks, urinals and XLERATORs®? It’s a health issue for crissakes.
Police may be called on to investigate reports [New South Wales] [Members of Parliament] or their staff accessed websites containing sexually explicit images of young people.
The findings were contained in an independent report by Ernst & Young, commissioned in September after an unauthorised audit of computer use in the NSW parliament showed “adult” websites had been visited from the offices of some MPs.
The report, tabled in parliament yesterday, says that of the 72 most-used websites on parliamentary computers over a 10-month period, 35 “appear to be adult-related sites”.
Nine contained sexually explicit images of young people, some of whom may be under 16.
Nearly 50% of the most-used sites over a 10 month period? And some that could involve minors (in NSW)! That’s impressive even by SEC standards.
We don’t recognize anyone but you’re invited to point any notables out.
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And you just know that somewhere, Dick Fuld is slobbing around in a old CU sweatshirt, muttering about backroom number-crunching dweebs that are still in business.
EY Boston Tax had their end of busy season party last week. On Tuesday, we had beer and wine in the office. Considering everyone had to work through the first football sunday of the year, the least they could do is get us drunk on a Thursday so we can enjoy ourselves. Who’s gonna get drunk in the office on a Tuesday? [Ed. note: show of hands?]
I have to say I’m disappointed with the social/drinking scene at this place compared to other Big 4s in this market. Pretty stiff, but I feel like the firm takes pride in that–I have no idea why.
Without the proper context, it’s difficult to know what kind of a drinker our tipster is. If he/she is merely a two wines/beers and out person then E&Y Boston is really bucking the trend in that fair city. However, if the tipster is Charlie Sheen, then there’s no cause for concern.
Any Bostonians familiar with the situation are invited to elaborate on the Big 4/next tier drinking scene below or share with us directly.
A source informs us that this is hardly surprise as E&Y has some the best known shops as clients including SAC Capital, Third Point, Anchorage Capital Partners, Reservoir Capital Group and Pershing Square. Although the HF honchos still appreciate the recognition:
“Receiving this award is a testament to Ernst & Young’s 25-year commitment to serving hedge funds through every phase of their business – from starting up through investment, global expansion and going public,” said Art Tully, Co-leader, Global Hedge Fund Practice, Ernst & Young LLP. “Since we began serving the alternative investments industry more than two decades ago, our seasoned professionals have worked to help hedge fund clients anticipate and meet new regulatory, transactional, accounting, tax, technology, operations and investor demands.”
“Ernst & Young’s hedge fund practice was founded on start-ups. In 2009, we audited the most significant share of the top 25 fund launches in 2009,” said Mike Serota, Co-leader, Global Hedge Fund Practice, Ernst & Young LLP. “As these organizations continue to evolve and expand, we can support their evolving needs through our extensive portfolio of services.”
E&Y is two for two in Hedge Fund Manager Week’s Best Accounting Firm Category so it’s a little early for any “dynasty” rhetoric but they seem to have a decent hold on things.
From the mailbag, courtesy of an E&Y senior associate:
I work for EY. Roommates are Deloitte and PWC. I’m hearing from the PWC employees that in addition to a holiday bonus, as well as a March compensation adjustment similar to Deloitte’s, PWC is also giving their employees the last two weeks of December off without requiring them to use their vacation days.
Thoughts on whether EY or KPMG will ante up? Hot topic at my client site today as you can imagine 🙂
Before we get to E&Y and KPMG, it should be noted that PwC is really playing hardball here. A quick recap:
• Mid-year bonuses that include an option for an iPad. Steve Jobs hater or not – that’s a cool bonus.
• New Yorkers given the option to shovel Thanksgiving sustenance at a Manhattan location to be named later (btw, we really want to know where, so get in touch with details when known).
Now there are rumors of a merit increase in March and two free weeks of time off? This is quite the run of employer gratitude. We won’t say “unprecedented” but it is an impressive show of generosity.
Maybe PwC has gone on this offensive because they had a kick-ass first quarter. Or maybe it’s because they lost the number one spot to Deloitte and they still want everyone to know that they’re still capable of equating love with money. OR maybe they’re trying to make people forget about Logogate. Whatever the motivation, the firm is throwing money around with the gusto of Charlie Sheen and they are getting a relative amount of attention for it.
Now, then – Ernst & Young and KPMG. Maybe these two firms are spreading the wealth on the Double-DL but if not, TPTB have to be aware of the what the competition is up to. If not, maybe someone should clue them in. Regardless, there has to be heat to act in some way.
One explanation for the House of Klynveld is that the fiscal year just ended, so it is too early for leadership to communicate “the great first quarter,” thus rationalizing a mid-year bonus. If KPMG comes out to soon with the news, they risk the “Monkey see” effect.
As far as E&Y is concerned, we’re stumped. They have the same fiscal year as PwC and should have a pret-tay good idea how Q1 went. Now that PwC has made the first move, any action by E&Y is going to look reactionary .
So for the E&Y and KPMG crowd – you clearly have some expectations for something but are you hearing anything about mid-year bonuses or will the belly aching continue into the holidays? Discuss below and get in touch with details.
If you work for a partner who likes shamelessly showing off their money, it’s likely that you will think to yourself one of two things: 1) “What a flashy douchebag.” OR 2) “How do I get to be that flashy douchebag?”
For Lily Aspillera, her thinking was more along the lines of the latter, as she made off with $1.7 million from 2002 to 2008 by writing checks to herself that drew on an account of an E&Y client. She used the cash to buy your run-of-the-mill embezzler items: German cars, jewels, vacations, a nice home, etc.
An executive assistant at the giant accounting firm Ernst & Young has been sentenced to more than two years in federal prison for a $1.7 million embezzlement scheme that helped finance a posh San Francisco home, two BMWs, jewelry and stays at luxury resorts, authorities said Wednesday.
Lily Aspillera, 65, of San Francisco was ordered Tuesday by U.S. District Judge Susan Illston to serve 30 months behind bars for mail fraud and tax evasion.
Impressive. Not necessarily by Sue Sachdeva’s standards but impressive nonetheless. However, Lil’s little scam only last a measly 6 years compared to Sachdeva’s twelve year scam because yes, her own greed got the best of her:
“Like so many who commit fraud, over time she increased the amount of money she embezzled, apparently emboldened by not getting caught,” Assistant U.S. Attorney Doug Sprague wrote in a sentencing memorandum.
Defense attorney Donald Bergerson wrote in court papers that his client “has been punished by her own conscience as much as she can be punished by any term of imprisonment.”
The personal guilt over getting caught – after managing to steal money for only six years – would be pretty overwhelming.
JT spoke to NYU students earlier this week and of course during the Q&A, Diane Brady, a senior editor at Bloomberg threw him a softie, asking if the firm was hiring, to which Diego responded, “we’re always hiring.” This, of course brought the house down (laughs, raucous applause).
Anyway, Brady decided to throw Jim a curve and asked why a young recruit would pick E&Y over Zuckerland.
“Should students ever consider starting at a big firm of yours?” Brady said. “Why not just go out there and make the billions with Facebook? What is the attraction at Ernst & Young?”
Turley responded by saying that most entrepreneurs, despite common misconceptions, are not just out to make money.
“[Entrepreneurs] go out there to find a need,” he said. “At Ernst & Young, you have opportunities to be extraordinarily mobile and move around the world.”
His advice? “First, find something that you love doing,” Turley said. “Second, align with an organization that actually thinks about where the world is going. And lastly, find an organization that wants you to change them as opposed to them to change you.”
See, if you can’t find a need then you need care about being “extraordinarly mobile.” Seems like a fair trade-off, especially since billionaires don’t travel much.
And just curious, how would the members of Ernie’s army like the firm to change? We’re assuming JT goes with the “whatever is good for the goose” mantra. Leave your suggestions below.
It’s our understanding that the firm is going to “unitized pricing” which apparently results in the increases above. In addition, the firm had an “eye discount card” in the past which was a freebee but now an insurance option has been added. The deductibles and out-of-pocket maximums are also increasing.
So question for the group – are you seeing similar changes to your benefit options for next year? Our feeling on the matter is that it’s always easier to blame a faceless insurance company than any other mega, faceless corporation but if you’d like to take issue with your firm on this trend, your rationale will be heard below.
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JT spoke to NYU students earlier this week and of course during the Q&A, Diane Brady, a senior editor at Bloomberg threw him a softie, asking if the firm was hiring, to which Diego responded, “we’re always hiring.” This, of course brought the house down (laughs, raucous applause).