Somebody at the PCAOB must have read the Wall Street Journal article last week about Mattel and its auditor PwC allegedly burying an accounting error tied to Mattel’s ownership of Thomas & Friends because everyone’s favorite mess of an audit regulator is reviewing PwC’s work, according to Bloomberg, and probably whether the firm broke any […]
Auditor shopping has made the news a little more than usual of late, with high-profile companies like Fitbit and Goldman Sachs in the U.K. both kicking PwC to the curb in favor of a fresh, new set of eyes. Then there’s General Electric, which might end its century-old relationship with KPMG after this year. While […]
There has been a trend in recent years of financial restatements for public companies decreasing, and 2017 was no exception. A new report by Audit Analytics revealed that the total number of restatements fell for the fifth consecutive year—from 873 in 2013 to 553 in 2017, according to Tammy Whitehouse of Compliance Week. She also […]
“And then I said, ‘It’s accrual world!’” Earlier this year, we discussed a tradecrafty story out of The Wall Street Journal of a BDO auditor who “casually wandered around the accounting firm’s New York offices, striking up conversations with colleagues.” Little did anyone know, the auditor recorded those conversations for the Federal Bureau of Investigation […]
For the last several years, one very interesting audit quality metric has not been widely reported in the media, and the largest audit firms barely mention it. It has been hiding in plain sight and could be a useful data point to audit committees or investors that are trying to understand the quality of audits. […]
Going Concern history buffs will recall a period in 2011-2012 when oil services company Weatherford International had some chronic problems with its tax accounting. Manipulations by two of its former accounting executives — James Hudgins and Daryl Kitay — resulted in a $500 million restatement in 2011. This was followed by two more restatements in […]
Valeant, a pharmaceutical company better known for impressive feats of corporate chicanery that are in no way related to developing drugs, says that its ad-hoc review committee checked out its accounting and determined that everything's a-okay. Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) today announced that the ad hoc committee of the board […]
A "special task force" assigned by Toshiba Corp to look into accounting irregularities found that the company underestimated the costs of three infrastructure projects by ¥50 billion ($419 million). The company also said that "the review was continuing and the ¥50 billion figure could be revised later," allowing for the possibility that this could reach VA […]
UPDATE: I relied on that figure provided by The Journal that incorrectly stated that the cost of the accounting error was $180 million. The correction states it hit profits by $153 million. Sorry for the error. Hertz, a car-rental company once endorsed by O.J. Simpson, disclosed that its shoddy accounting have cost the company $180 $153 […]
We're sharing the following with you not because we think it is a sign that both clients and their auditors have cleaned up their acts but it is a perfect example of how dangerous data can be in the wrong hands. Let's take a look at the results of the work done by Susan Scholz, […]
According to a Cornerstone Research report that you should absolutely read in its entirety if you are into this sort of stuff, lawyers are suing auditors more: Overall, auditor participation in class action settlements in the last several years has been lower than in the early years following passage of the Private Securities Litigation Reform […]
Audit Analytics has a great post today about Friday filing dumps, something that Footnoted has been calling attention to for years. Any time a company has to disclose bad news, the theory goes, they will most likely file it late in the day on Friday to soften the effect of an auditor resignation/restatement/announcement of massive […]
Here's a sign that a board of directors resembling a Guys Night Out at the Tilted Kilt could be a problem: New research shows that firms with at least one woman director are significantly less likely to restate quarterly or annual earnings than are companies with an all-male slate of directors—40% less likely, researchers […]
Earlier today, a little bird pointed us to an 8-K filed by Ignite Restaurant Group ("IRG") on July 18, 2012. In this filing we learn that IRG shared the always-riveting Item, "Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review." Observe: On July 18, 2012, the Board of Directors of […]
Before she became CFO of AES (and now Gannett), Victoria Harker had the distinct pleasure of mopping the floor at WorldCom after the company imploded in 2002 and, yeah, it was pretty awful: What has been your worst day on the job?The WorldCom meltdown was likely the worst day on the job. I knew only how little […]
Bloomberg's Jonathan Weil likes digging through dirty laundry. If you're an auditor, the PCAOB, a TBTF bank or in today's case, a natural gas producer, playing games that just so happen to cross his radar and it insults his intelligence, you can expect JW to open up your ringer of dirty undies for all of […]
The Wall St. Journal reports: Groupon Inc. GRPN +3.84% said it was revising lower the financial results it reported for its fourth quarter, after discovering the company had to set aside more money for customer refunds. The online-coupon site, which went public in November, said its auditor, Ernst & Young, discovered a "material weakness in its […]
Remember Weatherford International? That's the company whose internal controls (or lack thereof) led to $500 million in tax errors and restatements going back to 2007. Also as a result, the Chief Accounting Officer left the company to "pursue another career opportunity." Not the company's finest hour. After such a harrowing financial reporting experience, one might […]
Fun fact: Emerald's sea salt and pepper cashews are pretty much the tastiest nuts ever (don't tell my boyfriend I said that). As for Emerald parent company Diamond Foods' nutty accounting? Not so much. Just after this afternoon's closing bell, Diamond Foods' audit committee released the results of its investigation into the company's accounting for […]
More importantly, how are the KPMG auditors celebrating (because we want to know)?
From the 8-K, filed this morning:
On May 10, 2011, The First Marblehead Corporation (the “Corporation”) announced that its board of directors (the “Board of Directors”), in consultation with management, the audit committee of the Board of Directors (the “Audit Committee”) and KPMG LLP, the Corporation’s independent registered public accounting firm, concluded that certain unaudited financial statements previously issued by the Corporation should no longer be relied upon.
In order to correct errors in the recording of certain non-cash items, as described below, the Corporation will restate the unaudited financial statements contained in the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010 (the “Q1 Form 10-Q”) and the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2010 (the “Q2 Form 10-Q”). The Corporation expects to file the restated Q1 Form 10-Q and the restated Q2 Form 10-Q, as well as the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011 (the “Q3 Form 10-Q”), no later than May 16, 2011.
If you really want to get into the gory details, First Marblehead is bringing 14 securitization trusts onto the balance sheet that were previously accounted for off-balance sheet and its deferred tax assets in Q1 and Q2 are jumping over to the liability side (and the corresponding benefits are becoming expenses). The company says this is NBD as CFO Ken Klipper said, “These restatements … do not affect our cash position and are expected to have no impact on our ongoing business operations.” But the next six days may be a little uncomfortable for the accounting department and the KPMG audit team.
Because Jonathan Weil is wondering.
He noticed that Audit Analytics found that 699 SEC-registered companies filed restatements last year which was slightly higher than ’09. This was considerably less than the 1,566 restatements in ’06 but when it came to the number of banks that had restatements, he noticed something strange:
The figures for banks, in particular, look unnaturally low. Forty-four banks restated last year, one fewer than in 2009. Even more curious, there were 133 banks that issued corrections from 2008 through 2010. That was down from 169 banks during the previous three-year period, before the financial crisis took off in earnest, which makes no sense.
Here we had the greatest banking industry meltdown since the Great Depression. Hundreds of lenders failed. And yet the number of banks correcting accounting errors declined while the collapse was unfolding. There were no restatements by the likes of IndyMac, Washington Mutual or Lehman Brothers, for example. The obvious conclusion is the government has been giving lots of banks a free pass, as have their auditors.
Honesty for Banks Is Still Such a Lonely Word [Bloomberg]
It’s bad enough that 3% of Weatherford International’s revenues come from Libya, Egypt, Tunisia, Yemen and Bahrain but the company also revealed in a their NT 10-K filed yesterday that they aren’t so good at staying top of their taxes:
The Company’s Annual Report on Form 10-K (the “Form 10-K”) for the year ended December 31, 2010 cannot be filed within the prescribed time period because the Company has identified a material weakness in internal controls over financial reporting for income taxes and requires additional time to perform additional testing on, and reconciliation, of the tax accounts to be included in the annual financial statements to be presented in the Form 10-K. The Company expects to file the Form 10-K on or before the 15th calendar day following the prescribed due date.
FuelFix has the gory details:
Oil field services firm Weatherford International goes by the stock ticker is WFT, but analyst reaction to the company reporting more than $500 million in tax errors is more likely drawing the reaction of “WTF?” from investors.
The company said it will have to restate its earnings going back to 2007 due to “material weaknesses” in its internal controls, namely:
1. inadequate staffing and technical expertise within the company related to taxes,
2. ineffective review and approval practices relating to taxes,
3. inadequate processes to effectively reconcile income tax accounts and
4. inadequate controls over the preparation of quarterly tax provisions.
So in other words, Weatherford has no tax experts in their accounting department, no one to supervise or review the work of those experts and no checks or balances over the tax provision process as a whole. Was the Ernst & Young audit team aware of this? Last year’s 10-K had a clean opinion, in case you were wondering. Oh, and Weatherford moved its HQ to Switzerland back in ’08. So there’s that.
Back in September, Vermont-based Green Mountain Coffee Roasters put the world on notice that the SEC was asking some questions about their revenue recognitions policies. Despite the SEC Q&A, analysts we’re cool with the company and the GAAP the crunchy accounting group was putting out.
Also at that time, the company disclosed that there were some immaterial accounting errors that were NBD. That was until they dropped a little 8-K on everyone last Friday!