1 / 18

Auditors—the CPAs

Accounting Updates Part 2 Southern Gas Association Accounting & Financial Executives Conference April 28, 2003 Robert E. (Bob) Jensen Trinity University San Antonio, TX 78212 http://www.trinity.edu/rjensen/. Auditors—the CPAs.

tevin
Download Presentation

Auditors—the CPAs

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Accounting Updates Part 2 Southern Gas Association Accounting & Financial Executives Conference April 28, 2003Robert E. (Bob) JensenTrinity UniversitySan Antonio, TX 78212http://www.trinity.edu/rjensen/

  2. Auditors—the CPAs • Failed to accept responsibility for fraud detection (SEC, Supreme Court, public expects them to detect fraud) If auditors aren’t the watchdogs, then who is? • Became greedy--$500,000 per year per partner compensation wasn’t enough; saw everyone else getting rich • Audit became a loss leader • Easier to sell lucrative consulting services from the inside • Became largest consulting firms in the U.S. very quickly (Andersen Consulting grew to compete with Accenture • A few auditors got too close to their clients • Tradition of sending puppies out to yap at the receivables

  3. In a separate case in late September, a judge's divorce ruling unsheathed guarded financial information about accounting firm Ernst & Young, which is a private partnership that does not file public financial reports. In divorce papers for Ernst & Young chief executive officer Richard S. Bobrow, a 45-page judge's opinion revealed how much the CEO was paid and put a dollar value on the company for the first time, giving competitors a rare peek into the firm's finances.

  4. Annual Salary $ 3 Million $25 million in salary $US29 million in partnership earnings over the next decade. Pension worth $1 million a year for life and had access to a corporate jet owned by Ernst & Young and a New York apartment. $ 24 million to Janet Bobrow “Jan Bobrow, the ex-wife of Ernst & Young CEO Richard Bobrow, says she would have settled their divorce for a little more than $2 million. Richard Bobrow offered $1.2 million.” USA Today, October 15, 2002

  5. Moral Decay • Attendees at the April, 1998 Business Week Forum of Chief Financial Officers revealed: • 67% of CFOs said they had been asked by senior company executives to misrepresent corporate financial results • 12% of CFOs admitted they had actually misrepresented financial results…55% said they had fought off requests to “cook the books” • Honesty studies • 1961: 12% • 1986: 31% • 2002: ???

  6. Current Executive Fraud-Related Problems • Misstating Financial Statements: Quest, Enron, Global Crossing, WorldCom, etc. • Executive Loans and Corporate Looting: John Rigas (Adelphia), Dennis Kozlowski (Tyco--$170 million—the $15,000 umbrella stand) IPO Favoritism: Bernie Ebbers ($11 million) • CEO Retirement Perks: Delta, PepsiCo, AOL Time Warner, Ford, GE, IBM(Consulting Contracts, Use of Corporate Planes, Executive Apartments with meals, maids, etc.)

  7. Current Executive Fraud-Related Problems • Exorbitant Stock Options Who owns his own 14,000-foot mountain in Colorado?

  8. Largest Bankruptcy Filings(1980 to Present)

  9. Recent Financial Statement Frauds • Enron • WorldCom • Adelphia • Global Crossing • Xerox • Qwest • Many others

  10. Let’s Get Back to the Basics

  11. Back to the Basics… • Know your audit client • Understand the key reports used by management • Understand the budget process • Understand the source of growth • Know your client’s industry

  12. Professional Skepticism • Should be displayed by all members of the team throughout the audit and review engagements

  13. Back to the Basics… • Vary the audit testing performed • Prepare a detailed audit program • Understand the client’s closing process • Don’t forget the general ledger

  14. The Closing Process • Follow-up on all questionable items during the final analytical review • Examine all consolidating financial statements • Including, all post closing and top-side entries

  15. Back to the Basics… • Issues encountered during the audit --- • Deal with the issue at hand • Don’t try to “paper over” the problem • Management letter comment is not enough • Don’t make the client’s problem your own

  16. Key Elements of Public Trust Spirit of Transparency Culture of Accountability People of Integrity

More Related