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EY gets banned from new audit business in Germany

economist.com

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Re: EY gets banned from new audit business in Germany

#201

Post by looping__lui »

uni_rule wrote: post #197
looping__lui wrote: post #182

Earlier quoted context omitted.

Moody, Standard & Poors and Fitch are RATING agencies. RATING agencies are different from AUDITING companies different from CONSULTANCIES. Rating agencies were somewhat restructured after 2008 (but are still kind of edgy) - because they did literally write AAA on a piece of paper for money. But there ratings were opinions and had no real legal meaning.

I was about to say aren't there only 4 auditing agencies in the entire US after the fifth fucking imploded after the Enron scandal due to their reputation being tarnished?

No, there are more. But auditing an S&P500 corporation is pretty complex. I am not in the auditing S&P 500 corporation business and it looks like there may be six - but the Big4 literally seem to do 491/497 companies. I’m not sure I am too concerned about the auditing quality of the Big4 tbh though…

Enron’s problem was the “consulting AND auditing” mess with conflict of interest if I am not mistaken.

Re: EY gets banned from new audit business in Germany

#202

Post by theK »

dhruval wrote: post #173
theK wrote: post #165

Earlier quoted context omitted.

Not if you look at Audit (which is what the EY story is about). In Audit you have legislature requiring accountability structures and typically there will be one or more persons in an audit that are personally accountable about the attestation. These people in big fours typically are some certified auditors in their 30s and also a partner at the firm (40s and up)

Partners and managers review and sign off, but the people designing and doing the actual audit procedures are mostly in their 20s.

That is not correct. Audit is very regulated inside big auditing companies and the processes and evidence requirements are almost always part of an internal auditing framework that is designed by very senior staff.

Shure a lot of the leg work is being delegated off to juniors but that is not of substance here.

What you talk about might be happening in smaller shops but not on tier 1 audits inside the big four, there just is too much at stake.

Re: EY gets banned from new audit business in Germany

#203

Post by theK »

wil421 wrote: post #172
theK wrote: post #165

Earlier quoted context omitted.

Not if you look at Audit (which is what the EY story is about). In Audit you have legislature requiring accountability structures and typically there will be one or more persons in an audit that are personally accountable about the attestation. These people in big fours typically are some certified auditors in their 30s and also a partner at the firm (40s and up)

I know a few people who went into Audit after Masters in Accounting degrees. It was basically a 2 year post grad program to excel their careers. None of them wanted to go for partner it was just a 2-3 year box to check. I know much more people on the IT Consulting side who are in it for the long haul to partner or whatever. The job was also much better than the Audit scene, 80+ hour days in a sweaty conference room a…

You do have to delegate work in audit as well as in the other professional services disciplines. Nobody will contest that. What makes audit stand out though is that legislators require and enforce accountabilities (as the wirecard story clearly shows).

Re: EY gets banned from new audit business in Germany

#204

Post by hef19898 »

SilverBirch wrote: post #168

I don't know if I have just enough knowledge to be dangerous, but it seems to me that auditors don't really do what people think they do. Auditors seem mainly to just double check the numbers they're handed. This serves a purpose, it provides some level of guarantee that companies that are acting in good faith are generally reporting correct numbers. Auditors don't do what people seem to think they should do - invest…

The auditing arm of EY is in a completely different industry than McK and similar firms.

That EY's auditing track record is, well, checkered is a different problem. By throwing those two into the same bucket, so, shows some lack of understanding of auditing, accounting and consulting. EY also does, sometimes legally required "consulting" work for in the accounting space. That work is completely different from stragoc management consulting ala McK and BCG. And it also a different beast than the lower level outsourcing consulting ala Accenture.

Re: EY gets banned from new audit business in Germany

#205

Post by 7952 »

Cazafr wrote: post #130
lumost wrote: post #42

Earlier quoted context omitted.

Curious, this seems like a good place to deploy AI tooling. If I’m involved in internal controls, I’ll know what the auditors look for. If an AI can augment the auditors to find more suspicious transactions such as to companies with no employees, or conflicts of interest - I could probably find more fraud.

Ex-IT Auditor and I agree. I was screaming for automation in the audit process for years and nobody would listen. Many of the employees are burnt-out and hate their jobs. My prediction is that governments will decide to audit companies using some kind of AI and report back any findings to shareholders, while ensuring correct taxes are paid. Big 4 has 5 years max to pivot their business or they're going to die.

I guess ERP companies are better placed to offer this kind of thing than an accountancy?

Re: EY gets banned from new audit business in Germany

#206

Post by hef19898 »

helsinkiandrew wrote: post #9
jll29 wrote: post #5

If a CEO mismanages and goes bankrupt, they cannot start another company for 5 years; a two-year ban seems mild, but better than nothing, as the reputational damage is substantial (why would any non-criminal pick EY afterwards in good faith if there are others?).

As well as a €500K fine, five employees were also fined between €23,000 and €300,000. And seven others escaped punishment by handing back their auditor’s licences. I’m not sure many reputable public companies will be queuing up to use their services in 2 years time

If a certified and liscenced auditor in Germany returns his liscence, well, that person just ended their professional career. So the alternativr seems to have been considerable worse. Rightly so, Wirecard was a fuck up of epic proportions.

Re: EY gets banned from new audit business in Germany

#207

Post by hef19898 »

ChuckNorris89 wrote: post #30
shortrounddev wrote: post #29

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? I've heard the climate is very hostile to businesses in Germany; my sister in law was trying to sell art on etsy and apparently 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 and the only thing she needs to do is file her taxes correct…

>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.

Taxes are due where the business is managed, where the rwvenue is coming from and where tax authorities consider you a company of being a resident. So in your example, the Estonian company will still pay taxes as a German company. Which is explicitly stated in the tax treaty between Estonia and Germany.

Re: EY gets banned from new audit business in Germany

#208

Post by number6 »

chinabot wrote: post #185
23B1 wrote: post #179

I worked at Accenture as an MD for several years, primarily on innovation and transformation programs. I have plenty to say about them, but I think the key driving factor for all of the grift and awful performance has a lot to do with how they operate, which is to sell in a big program, then pull a switcheroo and try and pack a project with as many low-paid MBAs as possible – kids straight out of college tasked with…

Lets face it, the answer from chatGPT would be almost identical to what these consultants say, however the main reason for consultants is to CYA so if the decision is bad, you can blame someone else.

ChatGPT is not that old. So someone had to do the writing

Re: EY gets banned from new audit business in Germany

#209

Post by hef19898 »

calderarrow wrote: post #37
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…

Auditors have access to all the financials, but they only audit a statistically significant sample, because it would be incredibly expensive to audit every transaction. Fraud can be easily detected if one employee is committing it. Fraud is substantially harder to find if two employees are involved, specifically 2 employees involved in internal controls. For instance, if you have a policy that all checks paid over $1…

As a subject of some of those audots, and as being responsible for a subset of relevant processes, I can confirm. I'd just add that, at least under SOX audits, also the internal controls are audited. And if those controls are laclong, that is a, potentially major, audit finding as well.

Re: EY gets banned from new audit business in Germany

#210

Post by AniseAbyss »

SilverBirch wrote: post #168

I don't know if I have just enough knowledge to be dangerous, but it seems to me that auditors don't really do what people think they do. Auditors seem mainly to just double check the numbers they're handed. This serves a purpose, it provides some level of guarantee that companies that are acting in good faith are generally reporting correct numbers. Auditors don't do what people seem to think they should do - invest…

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