Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

EY gets banned from new audit business in Germany

economist.com

Post reply on HN
Print view View original

101–110 of 303 posts

Re: EY gets banned from new audit business in Germany

#101

Post by version_five »

wouldbecouldbe wrote: post #83

EY, Mckinsey, Accenture, BCG all of them should be banned. They were the big proponent of the the just in time management principles in the hospitals in the Netherlands. Then when covid came they were the first the market on twitter & linkedin for advice how to improve your health inventory & deal with covid challenges. Serious impact with zero skin in the game. These consultants are parasites. They are mainly used a…

This article is about auditing, your comments appear to be about consulting / advisory businesses.

Otherwise, I mostly agree, though I don't support a ban. It's a complex topic - companies are free to waste money how they want, and even governments do need real advice. It's just too bad they pick such shitty advisors to support decisions they've already made instead of actually seeking good advice.

Re: EY gets banned from new audit business in Germany

#102

Post by belter »

mostlystatic wrote: post #45
crazygringo wrote: post #31

> Auditors insist that their services cannot be treated as a guarantee that accounts are truthful, and note that sophisticated frauds are by their nature difficult to spot. As someone who knows nothing about this area, I don't understand why audits won't always detect fraud. I would naively assume that auditors have access to all financial accounts and records of cash flows and they make sure they all add up and are…

Don't know much either, but I found this Money Stuff story interesting: https://www.bloomberg.com/opinion/articles/2023-01-04/privat... Someone was CFO at two companies and the auditors only checked the year end balance against his falsified statements. So he transferred money from the other company temporarily to make them match. """To avoid detection, Morgenthau doctored African Gold’s monthly bank statements by, f…

Enron was doing similar trick by selling buildings to another business entity, and buying them back after the audit. I might not have all the details correct but it was the same type of shenanigans. :-)

Re: EY gets banned from new audit business in Germany

#103

Post by wongarsu »

AbrahamParangi wrote: post #58
avianlyric wrote: post #40

Earlier quoted context omitted.

> Really? 5 years? That seems really harsh. Is it all business failures or does it have to be due to mismanagement? There’s a big difference between bankruptcy and business failure. Plenty of businesses fail without entering bankruptcy, they’re wound down responsibly and their creditors are repaid in full. If a company fails due to bankruptcy, then it means that people who lent money to that business are out of pocke…

The counterpoint is what's the point of reducing losses on bankruptcy if it makes the entire business climate worse? By trying to protect creditors you just make everyone poorer.

Does it? You could equally well argue that punishing CEOs for bankruptcy makes banks more willing to lend money, improving the business climate.

And of course for startups in the early years it's not that relevant anyways, since nobody will lend you anything until you have revenue. VCs invest instead of lending and aren't owed anything if you shut the company down.

Re: EY gets banned from new audit business in Germany

#104

Post by bitL »

tom-from-july wrote: post #72
ChuckNorris89 wrote: post #30

Earlier quoted context omitted.

>she had to get a business license to do so in Germany. She's now back in the USA where she can just sell stuff online If you want to sell in the Germany, get a business license from Estonia or Romania or some other low-cost low-bureocracy EU country, and pay your taxes there. Germany is still living in the business climate of the '60s.

This is terrible advice and you or actually your Estonian company will be fined for tax fraud. In Germany income is taxed where it is generated, which includes the head of the person running the business. So if you run your foreign company from Germany - which is expect to be the case if you have no physical permanent office in Estonia, where you also have to be regularly present - you home is considered to be an bus…

That's why one should just move to Dubai and escape Germany and its crazy taxes and health insurance costs.

Re: EY gets banned from new audit business in Germany

#105

Post by version_five »

sega_sai wrote: post #48

And then there is also this https://www.ft.com/content/5e6f15ce-9eda-4b04-883d-686617020... -- cheating on ethics exams by EY. It's all very funny that the whole system is built on assumption where the supposedly knowledgeable, ethical experts audit companies, but in reality, it nowhere close to that.

"Cheating on ethics exam" sounds bad but it amounts to not taking some boring corporate CYA compliance training seriously, it's not actually unethical in my opinion. If anything it speaks to how bad corporate training is generally, not the ethics of the people "cheating".

Re: EY gets banned from new audit business in Germany

#106

Post by allendoerfer »

smugma wrote: post #84
Aeolun wrote: post #82

TBH, I don’t understand why anyone would be naive enough to hire EY and then actually trust them.

As a publicly traded company, you have to hire auditors. If you don’t like EY you can go to PwC, KPMG or Deloitte, but what’s the difference?

The others might be bad, but they are not Enron (EY Germany = former Arthur Andersen Germany) and Wirecard bad.

Re: EY gets banned from new audit business in Germany

#107

Post by bostik »

angus-prune wrote: post #26
ck45 wrote: post #17

Earlier quoted context omitted.

It would be an interesting idea to make auditors fully accountable like bankruptcy advisors. I know, this is never going to happen.

The current problem is that the insentives are all wrong. It is the company being audited that gives the auditers the business. Its not in the interests of a dodgy company to appoint a good auditor, and its not actually in the auditors (short term) interest to uncover wrongdoing as it just means they'd lose a client. My proposal is that you require every company to have insurance to cover the risks, making the insure…

The Maltese gambling regulator did something like this back in 2016. While the idea is good (and I support the practice in principle), it was a dismal failure in aggregate. Devil's in the details.

The regulator pre-negotiated approved rates and vetted a bunch of companies, all of which had to had presence in Malta. The audit reports have to be turned by mid-June, IIRC, and they can't really start until the accounts for the previous year have been finalised. So in practice the audits must take place between late February and mid-May. At the time the entire nation of Malta had about 450k people in total, and each audit blocks two accredited people for approximately three weeks.

Turns out there are a lot of gambling companies registered in Malta, and each pair of auditors could only process 5-6 companies within the allotted time. The country would have run out of auditors ... so they licensed a whole lot of local smaller shops as accredited gambling auditors to make up the numbers. Many of whom did not have the technical knowledge to actually even assess, let alone understand the businesses they were assigned to.

And I can say this from painful experience: there is real value having the same team of auditors for 2-3 years running. They will get to know how your company operates, and any good ones will figure out entirely new questions to ask you from year to year. By all means, be an adversarial assessor, but at least please be clued in.

Disclosure: on the receiving end as a key person in technical audits since 2015.

Re: EY gets banned from new audit business in Germany

#108

Post by cjbgkagh »

fnordpiglet wrote: post #49
cjbgkagh wrote: post #19

Earlier quoted context omitted.

The audited company often buys consulting services from the auditors which in effect is an extra incentive on top of the moneys paid for the auditing service. The mechanism that allows this is the ‘Chinese wall’ but that is a total joke. What really need to happen is to separate out consulting from auditing. That’s not going to happen though as there is just so much money is consulting.

What should happen is audit becomes a public trust financed by a tax on all public companies.

Audits can be very expensive and finding the optimal depth of auditing is difficult and unlikely that a public trust would be anywhere close to optimum amount. Financially savvy people should already know that the audit process is flawed and should not simply be accepted on face value. How flawed is usually stated in the audit, checks are split into controls testing and substantive testing. Usually the cheaper the audit the less substantive testing that is done. People need to trust audits less not more. If an organization is unable to pass an audit then it’s a really bad sign, if they have to hire EY to pass an audit then that is also a bad sign.

Also have you ever tried to stop something that makes a ton of money? It is damn near impossible. If governments had that much power the people who would lose their money have a very strong incentive to invest a large portion of that money into regulatory capture. So any solution that uses government must be predicated on a non-corruptable government which do not exist, at least not for very long. A variation of auditor’s prudence. A lot of our traditions and institutions that are resistant to corruption were designed and maintained that way to support wealth extraction via expansive empires, as you can’t export wealth if it all disappears into corruption. And empires must export wealth from colonies in order to compete with other burgeoning empires. Without such an empire to support the resistance to corruption erodes as the mechanism to reward those who eschew corruption disappears. It becomes increasingly difficult to acquire power without first being corrupt.

Re: EY gets banned from new audit business in Germany

#109

Post by itissid »

ryzvonusef wrote: post #96
crazygringo wrote: post #31

> Auditors insist that their services cannot be treated as a guarantee that accounts are truthful, and note that sophisticated frauds are by their nature difficult to spot. As someone who knows nothing about this area, I don't understand why audits won't always detect fraud. I would naively assume that auditors have access to all financial accounts and records of cash flows and they make sure they all add up and are…

> As someone who knows nothing about this area, I don't understand why audits won't always detect fraud. as some one who studied accounting and auditing, here is a page from my text: https://kfknowledgebank.kaplan.co.uk/audit-and-assurance/aud... but the tl;dr is that auditors don't provide "insurance", they provide "assurance", specifically reasonable assurance.... that the accounts are "true and fair" or to be put…

What Engineering tech/AI tech do you think could make the process more thorough but not proportionally expensive?

Re: EY gets banned from new audit business in Germany

#110

Post by electroly »

AndrewKemendo wrote: post #55
electroly wrote: post #46

Earlier quoted context omitted.

> Or can the numbers all add up but there's still fraud? Yes, of course. Consider that you've set up a separate company and you intend to steal money from your employer. You've got a buddy in accounts payable that you're in cahoots with. You get set up as a vendor, you send invoices to the company, they pay them, and you never deliver anything. The company's numbers add up. They pay vendors for services all the time.…

>you never deliver anything A thorough audit would reveal this as well though, as it would actually evaluate the entire supply chain is actually working as intended.

Right--this is a demonstration of how an audit is more than looking at double-entry accounting statements and "seeing if the numbers add up." That's the point of my post.
Post reply on HN