Rather than a fine ..
should not the FRC have insisted that all of E&Y's work was checked by another auditor for a couple of years ?
Ernst & Young is nursing a £1.8m fine from the Financial Reporting Council (FRC) after admitting to "misconduct" when auditing 2012 P&L accounts for distributor Tech Data that were later found to contain material mistakes. Tech Data (formerly Computer 2000 in the UK) revealed in 2013 that it had made financial blunders for …
The top accountancy firms want to do anything but audits and tax. It's all 'special advisory services' and 'risk'. And the bread-and-butter stuff, as we see, is done very badly. I had dealings with another Big 4 firm and the report I got was barely literate, let alone numerate. I agree with @alain williams: time to check all their homework.
I've got experiences with several member firms of the Big 4 networks. And I've seen both work done badly and work done very well in most of those firms. It mostly depends on individuals, whether they do their job well, and hence shows a lack of quality control. (QC is even less sexy business than the bread-and-butter stuff known as audit.) It's just right that both the company and the audit engagement partner get fined.
Regarding the £1.8m, this shouldn't be compared to EY's global revenue of $31.4bn. For a more meaningful comparison the £1.8m should be put in perspective to EY UK's revenue. It's still not going to ruin EY UK as in 2016 it was somewhere north of £2bn.
For a more meaningful comparison the £1.8m should be put in perspective to EY UK's revenue. It's still not going to ruin EY UK as in 2016 it was somewhere north of £2bn.
To take the precision down a further decimal place, EY Accountants LLP had (according to Companies House) turnover of £445m, and a profit available for distribution of £62.5m. Which tells us that the margin on accountancy services is about 14%, and the fine is therefore approaching 3% of last year's profit. That'll come out of the pocket of all partners, and they won't be happy, being a bunch of mercenary skinflints.
Regarding the quality aspect, the whole point of audit is to please the client, who pay the fee. Accordingly the auditors look to find some technical points for improvement to show they've done a great job, but really try and avoid looking too hard for toxic stuff. I can recall being asked to sign something that looked (to me) like dishonest reporting by a senior manager, and I queried it, and was told "<insert a big three letter accountancy firm> have agreed this with the director". I refused to comply and said "You won't mind signing it, then". Said senior manager gave me a sour look, but signed it (this was before PIDA, although fat lot of use that is). A few years later that company were fined £37m for fraudulent reporting. But the auditors were never named and shamed, or held to account.
I’ve had the displeasure to hire and fire 5 accounting firms in the past three years alone. At this point I’ve absolutely given up that anyone who graduated with an accounting degree actually knows how to add and subtract numbers.
Just one simple example: if you start with $50 in the bank, you spend $20 and your accounting software shows you have $35 left - that’s a problem. Once pointed out, it shouldn’t be “corrected” with a manual journal entry and forgotten about - you should track it down and actually figure out wtf is going on.
I just have a small business and these guys all but hosed our IRS and investor reports so I can imagine how jacked up the larger companies books are.
>Isn't the US tax code deliberately kept complex to 'encourage' people to use accounting firms?
Actually, I think it's deliberately complex in order to make it as difficult as possible to actually follow the law. That way they can screw you over if they decide you are a threat.
It has been my misfortune to have to work with E&Y every year as our outside auditors. One year I had to tell our higher ups that the E&Y person on site just wasn't up to the job and document why. That person was gone shortly after - but you never want to have your customers pointing out the incompetence of your staff. That said, none of the E&Y people we saw ever seemed to understand what they were supposed to do. I hope they have an A Team out there somewhere.
you missed "with a vastly bloated opinion of their abilities and importance"
Somehow I have a feeling that you and I would get on :)
That said, there are a few good people at EY - they're just never allowed near customers as they make the rest of them look bad. They're typically the people they roll out of they need to show staff in pre-sales, but they're *way* too costly to be allowed to operate a job as it reduces the profit margin.
My not so positive experience with consulting is why we prefer to use the term adviser. We tell consultants what to do, and worse (for them), we keep an eye on it so that it actually gets done with a degree of competence - that has actually become a job in itself. Personally I prefer to solve real world problems rather than supervise petulant children, but it pays the bills.
I *earned* my grey hair..
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