Reuters reports that a banking unit within Standard Chartered Bank hid more than $250 billion […]
Accounting News Roundup: Audit Committee Chair Resigns from WellCare Health; PwC, E&Y Officially Cut Iran Ties; Repo 105 = Pointless, Repugnant Practice | 04.26.10
Director Resigns at Wellcare Health [WSJ]
Regina Herzlinger was the chair of the audit committee of WellCare Health Plans, Inc., a Tampa-based provider of Medicaid and Medicare plans, but resigned last week amid controversy around the company’s accounting practices. The Wall St. Journal reports that Ms Herzlinger said that internal audits discovered the company overbilled the Illinois Medicaid program by $1 million “and potentially overcharged states for almost $500,000 worth of maternity care.” She also stated that the company “ran afoul of Georgia’s requirements that it account for each hich it paid providers, resulting in a $610,000 fine.”
WellCare also paid an $80 million fine to the State of Florida last May for a criminal investigation “into allegations that it had defrauded Florida benefits programs for low-income adults and children” as well as $10 million to the SEC for an investigation into its accounting. At least they’re keeping some attorneys busy.
Ms Herzlinger alleges that she was not renominated to her position on the board of directors for raising questions about the accounting practices at the WellCare as well as corporate-governance issues.
The Company claims that “good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective,” so at least they’ve got that point covered. The Journal also reports that the company is pulling the materiality card, saying that the “accounting errors Ms. Herzlinger identified were relatively small and the company’s own internal controls indentified them, indicating that its processes are working well.”
Lehman Investors Add Auditor Ernst & Young to Suit Over Deals [Bloomberg]
Charlie Perkins, the Lucas van Pragg of Big 4 accounting firms, has to be getting sick of repeating himself:
“Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time.”
Countrywide Investors Said to Settle Lawsuit for $600 Million [Bloomberg BusinessWeek]
KPMG is listed as one of fifty defendants in the lawsuit in California.
Companies Feeling More Pressure to Cut Iran Ties [NYT]
PricewaterhouseCoopers and Ernst & Young have both cut their ties with Iran, following KPMG, the Times reports. This results in grand total of zero Big 4 firms with affiliates in Iran.
United Against Nuclear Iran (“UANI”) President Mark Wallace received letters from both PwC and E&Y:
This week, Mr. Wallace’s group received letters from both PricewaterhouseCoopers and Ernst & Young assuring the group that they had cut ties with Iranian firms. PricewaterhouseCoopers wrote that the Middle East member of the company’s global network had had a “cooperating firm relationship” with Agahan & Company, an Iranian firm, but that it expired last year. Ernst & Young said it cut its ties in 2001 to the Tadvin Company, one of Iran’s largest accounting firms, even though Tadvin was still listed on its Web site this year.
Mr. Wallace called that a breakthrough because by publicly avoiding Iran, the American accounting firms that audit so many other companies send an important signal. “What it says is if it’s too risky for the Big Four accounting firms,” he said, “it should be too risky for other companies.”
Repo 105 Explained With Numbers and Detail [The Summa]
“Right now, I just don’t see what the big fuss is all about. The number differentials are just too small. Although a repugnant practice, Lehman didn’t accomplish much of anything with Repo 105 use.”
Holiday Weekend Accounting News: KPMG Bolts Iran; Financial Statement Reader App for iPad?; IRS Job Creation; Another Koss Fraud Theory; Toni Braxton Tax Trubs; Illegals Bilk IRS for $13 mil; Job of the Day | 04.02.10
See you Monday, capital market servants. It’s okay, tax warriors – Just think, two weeks from today and you’ll be sleeping in.
• KPMG severs Iran ties [FT]
T Fly and Co. has pulled the plug on Iran after big pressure from the UANI, “Tom Wethered, KPMG International’s general counsel, wrote to UANI on Thursday that the accountancy network had terminated the membership of Bayat Rayan, one of Iran’s biggest accountants.” The FT reports that the firm cited “serious and escalating concerns,” about the country’s government.
• Imagine: iPad App l Statements [XBRL Business Information Exchange via CPA Trendlines]
Someone make this happen ASAP. “Imagine it. Everyone connected by the Web, not the current Web but the Semantic Web. iPads, iPods, iPhones, Androids, Smartphones; maybe a few PCs will still be around. IFRS used globally. Financial information in XBRL making it dynamic like a pivot table, rather than static like the legacy paper statements.”
• Is Hiring More IRS Employees ‘Job Creation’? [The Atlantic]
There’s a lot of hysteria over the 16,000-some odd new IRS agents that will be running around the country trying to steal your freedom. Those are real jobs though.
• Koss Fraud: Unrecorded revenue? [Fraud Files Blog]
Tracy Coenen kicks around another theory of how alleged shopaholic Sue Sachdeva hid her embezzlement from Grant Thornton, “I’ve heard from a few sources who I consider to be very reliable that Sachdeva hid her theft by not recording revenue. This would mean that Koss’s revenue was understated by $31 million during the time she was committing her theft.” Tracy points out that this method would be “messy” but “There is almost no chance that the auditors will discover the theft and the cover-up. The bulk of the auditors’ work is spent on the balance sheet. So long as transactions related to the theft don’t show up in the ending balances of the balance sheet accounts, she’s pretty safe there.”
• Singer Toni Braxton bobbles tax bill [Tax Watchdog]
Toni Braxton really needs help. She now owes the IRS nearly $400k after a $71k tab from last summer. We’ll say it again – Get Ludacris on the phone.
• 10 illegal aliens in S.C. admit to bilking IRS out of $13 million [Greenville Online]
Who do the teabaggers get mad at for this one? Don’t they hate the IRS and illegal aliens equally? We can only hope that this will cause their heads to explode. Oh, and because it’s in South Carolina we can probably expect a lynching of everyone involved.
• Job of the Day: Fannie Mae Needs a Experienced Accountant [GC Career Center]
Four to six years experience, CPA required. Responsibilities include: Compile, review, analyze, and record financial information to the general ledger. Complete monthly closings. Prepare balance sheet and profit and loss statements, consolidated financial statements, and other accounting schedules and reports. Located in DC Metro. You!
It’s hard enough to be a Big 4 firm these days that you don’t need this. New York-based United Against Nuclear Iran (UANI) is a little upset with any and all companies that are doing business in Iran and just because you claim that you are a protector of the capital markets, that doesn’t earn you a free pass.
The Financial Times reports that UANI’s latest target is none other than the House of Klynveld and the lobby group sent a letter to Tim Flynn stating their displeasure with KPMG’s ties to their independent member firm in Iran, Bayat Rayan.
Flynn, who is stepping down as the Chairman of KPMG this summer, probably isn’t too psyched to have the firm lumped into the cross-hairs of UANI, who has relentlessly pressured companies to stop doing business in Iran.
The FT reported that the UANI set its sights on KPMG “after [a] week-long campaign against Ingersoll Rand ended with the Dublin-based diversified industrial company announcing on March 8 it was instructing its subsidiaries not to sell products ultimately destined for Iran.”
We contacted KPMG for comment but have not yet heard back regarding a response from the firm.
According to the letter, UANI will take “any and all action we deem necessary to hold KPMG accountable for its inappropriate business relationships with Iran,” which sounds pretty serious. Although we’re not sure what ‘any and all action’ will entail but for T Fly’s sake, we suggest he gets this resolved sooner rather than later. If he doesn’t, he can expect calls from Bill O’Reilly and his mug next to Ahmadinejad’s on the Factor.