Ernst & Young Aware of This Sino-Forest Situation, Seems Content to Watch It Play Out
Jonathan Weil has a column today on the train wreck that is Sino-Forest, the Chinese-Canadian timber company. In case you need caught up, there have been some questions about the company’s ability to report accurate disclosures and accounting. This led the research firm Muddy Waters to issue a not-so-flattering analysis of the company. Things like “Ponzi scheme” and “investing for the 23rd Century” don’t exactly get people jumping up and down for your company. Ask John Paulson.
Of course Sino-Forest didn’t do this all by themselves. They had credit rating agencies and auditors telling them everything was hunky dory for years and that’s Weil’s point. He reports that Fitch pulled its rating on S-F back in July and S&P finally pulled their rating this week. That just leaves Moody’s but guess who else is still hanging in there? Ernst & Young, baby! They’re still standing behind their audit opinions and showing no sign of budging. And JW is really curious to know who’s going to jump out of this tree first.
One question lingers: Which of the company’s paid opinion merchants will be the last to step aside? Will it be a credit rater? Or will it be the company’s auditor, Ernst & Young LLP in Toronto, which has yet to rescind any of its reports on Sino-Forest’s finances?
So far Ernst looks like the favorite, with only one rating company left in the hunt. Think of it as a contest between giant tortoises to see which one is slower. This time-honored ritual — of market gatekeepers waiting to blow the whistle until long after a scam has been exposed — has become so familiar, we might as well revel in the spectacle.
So these “gatekeepers” Weil speaks of – obviously this includes the Big 4. And it’s true that we’re all used to them waving their arms, screaming “DANGER!” in front of the burning heap that everyone has been aware of for ages (I didn’t say Lehman Brothers. Did you say Lehman Brothers? Who said Lehman Brothers?).
ANYWAY, E&Y should know that they have choices:
Ernst does have options, aside from bracing for the inevitable years of litigation and investigations. It could resign, explain why it is doing so and face criticism for acting too late. It could withdraw its previous audit opinions. It could insist to Sino-Forest’s directors that it be permitted to answer questions from the public about the work it has performed, as a condition of remaining onboard. Or it could hang on in silence, as it’s doing now, and watch its reputation endure more damage.
Could be that this is just another part of E&Y’s strategy. Sit tight while things play out, wait until things get really serious (i.e. bankruptcy, severe economic turmoil, civil charges, etc. etc.) and then come out swinging.
Tree Falls on Sino-Forest, Auditor Can’t Hear It [Bloomberg]
Accounting News Roundup: More Tax Cuts for Small Business?; Scenes from a SaaS Meltdown; SEC Files Charges Against Sachdeva | 09.01.10
No Charges for Moody’s in Ratings Violation [NYT]
“The Securities and Exchange Commission said Tuesday that it had declined to charge Moody’s Investors Service for violating securities laws by failing to comply with its own procedures for rating complex derivative sec e decision followed an S.E.C. investigation, and the commission used the opportunity to warn all of the national credit rating agencies that it would use new powers under the Dodd-Frank banking law to take action against similar conduct, even if it occurred outside the United States, as the Moody’s case did.
The S.E.C. said it had declined to pursue a fraud enforcement action in the case because of jurisdictional issues. The securities in question originated in and were rated and sold in Europe, the S.E.C. said.”
Tax Cuts Weighed to Spur Economy [WSJ]
“The Obama administration is considering a range of new measures to boost economic growth, including tax cuts and a new nationwide infrastructure program, according to people familiar with the discussions.
The president’s economic team has met frequently in recent days to list ways to bolster the struggling recovery, according to government officials.
On the list of possible actions: additional tax cuts for small businesses beyond those included in a $30 billion small-business lending bill before the Senate. It’s not clear what those tax breaks would target or how much they might cost in lost revenue to the government.
Also in the mix: a possible payroll tax cut for businesses and individuals, as well as other business tax breaks, according to people familiar with the discussions. Currently, income taxes are scheduled to rise with the expiration of Bush-era tax cuts at the end of this year.”
Lessons from ClearBooks failure [AccMan]
What happens when a SaaS provider has a blow-up? Well, it depends.
“Non-Combat” Troops Remaining in Iraq Will Still Receive “Combat Zone” Tax Treatment [Tax Foundation]
The troops that remain in Iraq will still receive combat zone treatment (i.e. ‘designated hostile fire or imminent danger pay areas’).
Brainiest Cities [The Daily Beast]
Boulder #1; DC #3; Boston #4. Austin comes in at a paltry #16 behind Ames, IA. What’s up with that?
Former Rothstein CFO Stay Gives Up Boat [SFBJ]
Convicted Ponzi Schemer Scott Rothstein’s CFO had to give up her 28-foot 2008 Southport boat in order to settle a claim against her for the $154k loan she received from the firm to buy said boat.
SEC Charges Two Accounting Professionals at Milwaukee-Based Company with Fraud [SEC]
The SEC got around to filing civil charges against Sue Sachdeva. The Commission also charged Senior Accountant Julie Mulvaney with helping S-square conceal the fraud through bogus journal entries.
Job of the Day: Moody’s Needs a Senior Internal Auditor
Moody’s needs a senior internal auditor to help keep their internal controls tip-top.
The position requires 3 to 5 years of experience and requires some both domestic and international. Check out more details for this position after the jump.
Title: Senior Internal Auditor
Location: New York
Minimum experience: 3 years
Responsibilities: Plan and execute financial, operational and SOX audits of Moody’s ratings and analytics businesses in accordance with the internal audit plan and departmental & the Institute of Internal Auditors standards; Develop a complete understanding of Moody’s ratings and analytics business, current accounting, compliance and operating policies; Assist Internal Audit management with defining and updating the annual and long-range internal audit programs based on associated financial, operating and compliance risks;
Execute internal audits with the following responsibilities: Plan and communicate the detailed audit scope; Supervise & develop staff auditors; Oversee 3rd party internal audit professionals; Ensure timely completion of audits; Communicate all aspects of audit results / findings timely from the closing meeting to the final audit report; Assist with updating Internal Audit policies and procedures based on changes within the profession.
Qualifications: Bachelor’s degree in Accounting with approximately 3-5 years experience; A combination of Big 4 Accounting firm and private industry experience is preferred; CPA required; Ideal candidate will have an understanding and experience of a global organization and a strong knowledge of GAAP; Ability to travel 20% (domestic & international); Proficiency in financial system is a must – PeopleSoft Financials highly desirable.
See the entire description over at the GC Career Center and visit the main page for all your job search needs.