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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

#211

Post by hef19898 »

ozim wrote: post #70
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…

There are different types of audit. I expect that EY does not have access to numbers and any account information. You give away as least information as you can because you cannot just trust auditing team from some 3rd party not to use that data in collusion with your competitors. What I expect they do have access to is documentation for procedures and processes. They audit for example if all procedures are written do…

Quite the opposite, EY as an aidotor has, and is supposed to het, access to any financially relevant data, documents and transactions they need to their job. That includes, among other things, invoices to customers, suppliers, inventory data and transactions, bank statements, credit card data, contracts with clients and suppliers and so on and so forth. That is actually part of a financial auditors job and responsibility. Yryong to minimize data access is exactly what Wirecard did, and EY accepted for some reason. Which absolutely not normal, it is in fact a major red flag.

Re: EY gets banned from new audit business in Germany

#212

Post by grogenaut »

lumost wrote: post #42
calderarrow wrote: post #37

Earlier quoted context omitted.

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…

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.

But that's the exact opposite to the economics of consulting esp at these big companies. The goal is to get as many low cost employees doing the most amount of high bill work as possible to make the most profit. Automation or ai would just lower what you can charge by removing 1000 hours per year of a college grad making 50-90k while charging at 500k a year for them. And you need these rates to cover for the highly paid sales leads and project leads as well as profits. You'd have no good way to pay your high bill rate applied scientist.

But why does cost not matter on the contract? A few reasons, one being is these are hourly contracts and the consultants know the customer has to finish the project. there will be more money. Second the customers are picking one of these companies on rep. If they fire the consultants they just rotate through the rest of the big five. There's no real incentive for the big five to change their model with customers who are making decisions based on who sponsors the golfer they like. Just like how every VC used svb, go with who you know.

This is why I left consulting. Every good shop gets wooed by the siren song of butts in seats economics. After consulting I've moved to where I sonetimes have to damage control projects from the big 5 and other high end large tech consultants on code. They're all doing the same thing if they get that big.

We had 2 recently with nationally renowned consultants where the provided heads couldn't use basic shell scripts or basic cloud cli, all at a senior DevOps bill rate. I ended up interviewing several of them and the only one of them id trust was their senior principal architect (5% time) who I'd put as a Jr/sr sysde/sde at our co. We fired the consultants. Luckily we only wasted money, our pm, and a few hours of my time.

Beware any company that competes with beer and insurance companies for commercial slots.

Re: EY gets banned from new audit business in Germany

#213

Post by hef19898 »

Aperocky wrote: post #147
smugma wrote: post #84

Earlier quoted context omitted.

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 incentives are misaligned. Publicly traded company should pay a small fee to SEC each year and they be responsible to hire auditors, for everyone. Or even better, market bid for auditors with incentives for finding irregularities. With the current line up of incentives, auditors merely ensures any fraud are slightly better hidden.

SOX is such a well thought of law. It requires any public company listed in thr US to have one auditing company and one "consulting" company supporting the set up internal controls and processes, prepare the books and so on. Those comoanies have to br changed every couple of years (if memory serves well every four years), and you cannot simply switch roles and stay with the same two. Hence a market demand for the big four: A prepares the books, B audits them. Then C replaces A and D replaces B.

Read up on regulations, it helps!

Re: EY gets banned from new audit business in Germany

#214

Post by free652 »

portpecos wrote: post #196
whimsicalism wrote: post #184

Earlier quoted context omitted.

I worked in government and they were still obviously smarter than the gov workers. Experience is not everything and I think that should actually be a major lesson from government employment practices.

How can a 23-year-old with four years of college experience and one year of corporate experience possess more expertise than a government employee who has dedicated a decade to working within their specific domain?

The latter just collects the paycheck and could care less about anything else, they won't get fired.

Re: EY gets banned from new audit business in Germany

#215

Post by sizzle »

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.

Their consultants are probably utilizing ChatGPT now to 10x their buzzword bingo outputs

Re: EY gets banned from new audit business in Germany

#216

Post by unixhero »

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…

Ex accenture here, left and started my own. M u c h better and my clients love that I am not from a big shop. Money is good and life is smiling.

Re: EY gets banned from new audit business in Germany

#217

Post by benatkin »

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…

Part of the grift is that roughly one of ten of these unproven low-paid MBAs will be exceptional. So when one does a good job they'll use it as an example of typical performance. I see this happen with dev talent agencies and unproven software engineers. Only the great projects go in their portfolio and the satisfied clients are happy to appear on their website because they don't realize they just got lucky.

With software engineers some of the remaining 90% really are talented but spend most of the project learning on the job, fixing an issue in a few hours that a senior engineer in their stack could fix in 30 minutes with their arcane knowledge. Meanwhile the senior engineer goes to the scrums (they love to hide behind agile). It's a solid grift.

Re: EY gets banned from new audit business in Germany

#218

Post by andrewjl »

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 auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.1 Because of the nature of audit evidence and the characteristics of fraud, the auditor is able to obtain reasonable, but not absolute, assurance that material misstatements are detected.2

https://pcaobus.org/oversight/standards/auditing-standards/d...

Re: EY gets banned from new audit business in Germany

#219

Post by andrewmutz »

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…

Does outsourcing major strategic initiatives even work? Seems like the definition of the sort of things you shouldn't outsource

Re: EY gets banned from new audit business in Germany

#220

Post by hef19898 »

krn wrote: post #188
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…

> Well ok, but was EY less competent than McKinsey or did they just get unlucky that they're the poor bastards who stepped on the landmine? I have asked myself the same question, before I noticed that EY is basically the Credit Suisse and the SoftBank of the audit world[1]: > EY has been involved in many accounting scandals: Bank of Credit and Commerce International (1991), Informix Corporation (1996), Sybase (1997),…

Well, EY started as part of Andressen (?) and was as such part of the Enron scandal. We shouldn't ignore the scandal of the century. EY so is a very reputable accounting firm. Unreputable would be the Metaverse headquartered shop FTX used.
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