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California Board of Accountancy Wants to Throw the Book at Mayer Hoffman McCann for City of Bell Audit
Remember the fiasco in Bell, California? Mayer Hoffman McCann performed an audit of the city […]
After learning last week that the City of Riverside was kicking Mayer Hoffman McCann to the curb, another small town in SoCal is dropping MHM after that little mishap up the road in Bell.
From the Santee Patch:
Santee Mayor Randy Voepel has confirmed that the city will soon be searching for a new auditor.
The city’s current firm, Mayer Hoffman McCann (MHM), found itself amid scandal and controversy in July 2010 when the Los Angeles Times reported the firm “rubber stamped” a 2008-09 audit for the city of Bell.
Despite the announcement, MHM gets the pleasure of finishing Santee’s ’09-’10 audit (partner has to be LOVING it) but Mayor Voepel, not being the type to give second chances to two-bit accounting firms, is cutting them loose:
Although Voepel said that none of the people who worked on Bell’s audit have worked with Santee, he’s not interested in continuing a relationship with MHM at this time.
“We’re going out to bid for a new auditor,” he said. “Anyone that does bad deserves to be punished, and I would like to not have that particular firm perform our audits in the near future. Down the road, sure, they can quote in our bids again. But right now I’d like to get new bids.”
Possible translation: “We don’t want anything to do with these clowns. Mayer Hoffman McCann will only audit Santee, California over my dead body or impeachment after I am caught on camera at a donkey show in Tijuana.”
If you’re a small city in California, you probably won’t be looking to Mayer Hoffman McCann to do your audits. If you’re already with them, it’s time to go auditor shopping.
Following the debacle that was Mayer Hoffman McCann’s completely blown city of Bell audits, the city of Riverside has joined the angry mob and will not be looking to renew with MHM any time soon. Riverside’s CFO Paul Sundeen said “given that the firm’s five year contract with the city is at its end and the controversy at the city of Bell, we will not include them [when seeking proposals for an auditor]”. Sorry, MHM, don’t wait by the mailbox for that invitation because you aren’t invited to the party.
Now that’s not nearly as harsh as getting fired by the client but sends a clear message to MHM (and any other questionably-equipped-to-do-their-job auditors out there) that ineptitude will not fly with the client. Unless, of course, there’s a conspiracy at work to defraud TPTB, in which case ineptitude is totally welcome if not encouraged.
Once again, it comes down to scope. No audit firm should be expected to look at every receipt and every statement but in the case of the Bell audit, auditors obviously missed some very large accounts either on purpose or because the firm sent a bunch of fresh-faced neophytes down there (this rarely happens) to actually perform the audit (Note to MHM: $8.89 million is significant unless you’re auditing the King of Saudi or the Federal Reserve). What happened to the accountability SOX promised us?
Said Riverside city controller Jason Al-Imam, “They want to do the right amount of work because they don’t want to lose their license, but they can’t audit everything. Sometimes something might go wrong and that just might be an area that they didn’t look at.”
Scraping by isn’t doing it anymore for the profession, so Riverside is more than welcome to go track down some new auditors but who wants to bet the kids doing their next audit will be just as fresh-faced and clueless as the last bunch MHM sent to fetch the client’s bank recs and invoices?
City of Riverside to drop Bell’s financial auditor [The Riverside Press-Enterprise]
Editor’s note: This post was republished, in part, with permission from Jr. Deputy Accountant.
I’m no auditor so perhaps it’s out of line for me to say as much but since when is $8.89 million considered not significant? MHM blew it when it comes to the California city of Bell and the office of the state controller doesn’t like the “rubber-stamp” approach – maybe the state controller needs a lesson in “same as last year” and a quick and dirty primer on how audits really work. As in, they are a total farce and rubber stamps are the best we can do when we’re not checking boxes and counting chairs in warehouses on New Year’s Eve.
A prominent accounting firm’s audits of Bell’s city finances amounted to a “rubber-stamp,” according to a state controller’s study concluding that much of the alleged wrongdoing would have been detected earlier had the firm done its job.
The long-awaited report is being closely watched because Mayer Hoffman McCann audits the books of dozens of government agencies in California and has 30 offices nationwide. Officials at several agencies, including California’s public employee retirement board, have said they were awaiting the controller’s study to help determine whether they would consider changes in their auditing contracts.
The controller’s office found that MHM failed to comply with 13 of 17 “fieldwork auditing standards” when reviewing Bell’s books in the 2008-09 fiscal year. The firm focused mostly on comparing financial numbers year to year rather than looking at potential for inappropriate or illegal activities, the controller’s report said.
Don’t trip, the California Board of Accountancy is on it. Surely.
Chiang said his office is forwarding the report to the state Board of Accountancy, which regulates accounting firms in California. A board official has said it would open an investigation. If significant problems are found, penalties could range from fines to the loss of licenses. The controller also sent copies of the study to the Los Angeles County district attorney’s office and state attorney general, which have been investigating the city.
MHM strongly disputed the controller’s findings, suggesting that Bell officials deceived the firm. “Recent evidence disclosed by the controller’s office shows that Mayer Hoffman was subjected to a massive scheme of collusion that reached through every layer of city government, to undermine the audit process and deceive the auditors,” the firm said in its response.
Bill Hancock, president of the firm, said in a statement that his firm “adheres to the highest standards…. But in those 50 years we have never seen anything like the pervasive collusion of so many individuals acting in concert to deceive auditors, as happened at Bell.”
Jump over to JDA for the rest.