Posts Tagged ‘deloitte’

Once Again, Audits Don’t Find Fraud (But Short Sellers Do)

Anyone who is being honest will tell you that financial statement audits don’t find fraud. On the rare occasion they do, but by and large audits are not designed to detect fraud and the auditors don’t have enough fraud detection training.

One solution to this problem is the engagement of forensic accountants to look for fraud. But companies don’t seem to interested in going the extra step.

Today Hewlett-Packard announced that an internal investigation revealed accounting fraud by Autonomy, a company that was acquired by HP last year for more than $10 billion. More specifically, the company said:

Auditor Malpractice: How to Sue an Audit Firm and Win

Last week, Reuters printed an interesting and enlightening interview with Steven Thomas, the managing partner of Thomas, Alexander & Forrester … an attorney known for suing large auditing firms for malpractice… and winning!

Recent big wins include $520 million and $130 million judgments against BDP Seidman, on behalf of Espirito Santo and Batchelor Foundation, respectively. Auditors Ernst & Young (E&Y) and KPMG have been on the losing sides of large cases, and Deloitte, E&Y, KPMG, and McGladrey & Pullen are all current defendants.

So how does Thomas (or any plaintiff’s attorney) win a case against an auditing firm when there is a sizeable fraud (such as the Koss Corp. embezzlement) or the collapse of a Ponzi scheme (such as the Bernie Madoff case)?

Overtime Lawsuits For Big Auditing Firm: Could It Lead to Problems For Other Firms?

Class action suits against auditing firms PricewaterhouseCoopers and Deloitte & Touche are raising questions about future lawsuits. Auditors are suing PwC because they say they were denied overtime pay and benefits, and the suit covers all associates and senior associates of PwC in California.

The firm is saying that the auditors were properly classified as exempt employees under California law, and therefore they were not entitled to overtime pay.

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