by Brian Mahany
It’s no secret that we are not fans of the Big 4 accounting firms, particularly when it comes to their auditing practices. It’s not these firms don’t employ good people, they do. Rather, the huge accounting firms frequently lose their independence, especially when called upon to audit a client that generates millions of dollars in annual revenues for the audit firm. Just about everyone agrees that Enron resulted in the collapse of Arthur Andersen. And we believe the mortgage banking collapse will ultimately lead to the collapse of several more big audit firms.
Today we learned that the Hong Kong Securities and Futures Commission began legal proceedings against Ernst & Young Hong Kong for failing to turn over records relating to the audit of a Chinese company, Standard Water Limited.
Chinese companies have been coming under increasing scrutiny for bad accounting and financial practices. The firms that audit them are also under scrutiny. In this case, it is hard to tell who is at fault. According to published reports, Ernst & Young says it can’t turn over the records because they are at their affiliate in mainland China and there are some legal restrictions about disclosing the documents. Hong Kong regulators disagree.
Whether or not Ernst & Young is hiding something or really prohibited from turning over records remains to be seen. From the public perspective, however, it’s another black eye for the big accounting firms.
Without true independent review and financial transparency, investors are wary to invest in pubic companies and are wary of the “independent” audits too. The legal action against E&Y is not likely to help the situation no matter what the outcome.
The fraud lawyers at Mahany & Ertl help whistleblowers (usually current and former employees) of audit firms and others that have information regarding violations of U.S. securities laws and fraud that hurts taxpayers. Whistleblowers are entitled to receive large cash awards, typically 20% of whatever the government collects in fines or losses.
We are presently looking for people with inside information about audits of mortgage companies and banks that failed to find fraud or assisted in covering it up. Of course, we are always looking for people from these lenders and banks as well. In one recent case, we reported that a quality control manager at CitiMortgage received $31,000,000.00 for information that she provided about substandard loans that were passed off as legitimate.
If you have information about a fraud, contact us right away. Usually only the first one to file a claim is entitled to a reward. In many instances, you can remain anonymous, although there are major differences between the various whistleblower programs.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many jurisdictions.