Skip to main content

Sued for failing to detect fraud?

Following are excerpts from a recent Wall Street Journal Article about Ernst and Young and the rest of the big 4...

"
Ernst & Young LLP settled for nearly $300 million a lawsuit brought against it by Cendant Corp., according to a securities filing late last year by a former Cendant subsidiary. In its suit, Cendant alleged that Ernst negligently failed to detect a massive fraud during its audits of a unit of the company.
Ernst had already, in 2000, paid out $335 million to Cendant shareholders as a result of the fraud. "

"
While the most recent settlement doesn't eclipse the size of Ernst's first Cendant payout, it is still one of the largest payments made by an audit firm. In 2007, for example, PricewaterhouseCoopers LLP agreed to pay $225 million to settle audit-malpractice claims arising from its audit of Tyco International Ltd. Deloitte & Touche LLP, in late 2006, said it would pay $210 million to resolve claims related to Adelphia Communications Corp."


I thought the firms weren't liable to the company for catching fraud, but apparently they are. Damn!

Comments

Eric said…
I'm a newb going into public accounting next year. I just wanted to say that I love your blog. It has really helped me get a clearer picture of what to expect! Thanks!

Popular posts from this blog

career progression

"What can you tell me about the different possible tracks a person would take at the Big 4 in regards to tax vs. audit? Is there a difference in career progression among the two specialties? How about career potential? Workload?"

Loaded question. In terms of career potential, they're both pretty potent. Audit leads you to controller/accounting manager/ VP - accounting positions at companies if you choose to quit. Tax can lead to tax manager positions at various companies/firms..to help them minimize taxes and exploit tax loopholes. It's a pretty important position in many companies...I'm not an expert on tax careers though, so you might want to ask somebody in a tax related position.
In terms of career progression, it's the same as audit...start off as a staff associate...move to senior..manager..snr mgr..partner.
In terms of workload, my friends in the tax department seem to work two busy seasons...in the fall and in the spring. So I think they work more than i…

auditing vs consulting

I was wondering if you could break down the career opportunities in auditing and consulting (in a big 4). I know that consulting pays more in a big 4 and has more interesting work, but it seems that auditing has extremely good exit opportunities (Financial controller, CFO etc). Any thoughts on which is better in the long run?

Well there's different consulting services offered by public accounting companies - the most popular being IT consulting and risk consulting. There are also other consulting services offered, but these two hire the most. Do they pay more? Yes, but not by much. Not enough for you to say: Shoot, the $$ is a huge reason for me to move over. Is the work more interesting than audit? Yes. You're actually looking over a company's processes and telling them what to do instead of what not to do (audit). Everyone I know who's made the switch likes it waay better than audit.
In the long run though, choosing audit vs consulting really depends on what you want t…

Boomerangs

As a big four employee, lately, I've been hearing a lot about "boomerang" employees. Those who, for some reason or another, decide that leaving work when the sun is still out is not for them and alas, return back to the firm. Yes, the grass is not always greener on the other side, however, is this trending upward or about the same as it always has been? I think, also, that the firms really do a good job in highlighting those that do choose to return to make it appear more common than reality. Can you please speak about how you've seen the trend of "boomerangs" amongst the big 4? 

Good question. A boomerang, as the commenter pointed, is one who quits a big 4 Firm and then decides to return (or boomerang) back to the Firm after getting a taste of work life in the non-public accounting world.
I have seen a few return this past summer, but didn't really notice a trend until you mentioned it. It's definitely been higher than past years, but not enough to s…