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Court4Fred
Advanced Member
1201 Posts |
 Posted - 11/02/2006 : 09:23:35 AM
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Poll Question:
The Hanlon Administration has made no bones about the fact that they want an audit; in fact - they want it so badly that they went ahead with the audit AFTER it was rejected by the BOA. Some feel that the audit is necessary - others think it is an expensive politically motivated witch hunt, particularly given the fact that Mr. Hanlon rehired the very same auditor (since "retired") who was at the helm when the superintendent mismanaged hundred of thousands of dollars according to state auditor DiNucci's state audit last year. The new auditor has little municipal experience. What are your thoughts?
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Edited by - Court4Fred on 11/02/2006 2:53:50 PM |
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Fran
Senior Member
250 Posts |
Posted - 11/07/2006 : 09:32:16 AM
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Where Were The Auditors?
Elizabeth MacDonald 11.06.06, 6:00 AM ET
It's pretty clear by now that the stock option backdating scandal is much more widespread than initially believed. More than 150 companies are either embroiled in internal probes or are now being investigated by the Securities and Exchange Commission for potential stock option backdating abuses. The deluge is growing daily, with a fresh batch of companies announcing stock option accounting problems with each passing day.
The new entrants: Graphics chip maker Nvidia said it expects to book charges of less than $150 million and restate financial results from 2004 through the first quarter of 2007 to fix option accounting mistakes. Agile Software said it "will need to restate" earnings reports for fiscal 2000 and later due to similar problems. Semiconductor maker Atmel disclosed it intends to restate earnings for the periods covering 2003 to the first quarter of 2006 because of option accounting snafus.
So where are all those expensive auditors who are paid a lot of shareholder money to catch such problems? Right now, just as in past accounting scandals, they're reverting to type: They're trying to run away, or at the very least, blame the accounting rules.
Backdating involves setting the strike price of an option retroactively to a day when the stock traded less expensively. An option with a lower strike price is more valuable because it costs less to exercise and has a higher pop.
The ballooning backdating scandal has claimed plenty of scalps. The chief financial officer at Apollo Group, the for-profit education company, resigned after an internal probe revealed mistakes in stock option accounting. Apollo also said it would have to restate past results. The former chief executives of Internet information provider CNET Networks, security software maker McAfee and online recruiter Monster Worldwide have all stepped down due to options backdating allegations. To date, just two companies, Brocade Communications and Comverse Technology, have been hit with criminal indictments due to backdating allegations.
Jack Ciesielski, editor of the Analysts Accounting Observer, says the issue of auditors' responsibility came up at a recent corporate governance conference sponsored by Stanford Law School and attended by SEC Chairman Christopher Cox and SEC Enforcement Director Linda Chatman Thomsen. Ciesielski says that moderator Katherine Schipper queried Daniel Goelzer, a member of the Public Company Accounting Oversight Board (PCAOB), about whether the PCAOB will chastise auditors for failing to catch the backdating fiasco.
Although the PCAOB is supposed to crack down on auditor problems, it seems even the PCAOB is giving auditors cover here. Ciesielski says Goelzer gave this telling reply: Since accounting rules for years didn't require companies to book an expense for this compensation cost, why should auditors then be required to spend a lot of time and effort searching for malfeasance?
Ciesielski adds that Schipper, who seems to be miffed by the auditors' abysmal oversight, then asked if the auditors should have caught the misdating anyway in their audits of footnote disclosures (option footnotes have been a fixture of financials since 1996), as the footnotes could have uncovered contracts with incorrect dates. Ciesielski says Goelzer again replied most auditors might have had no reason to believe that the documents they were examining were false at the time.
Ciesielski adds that another member of the panel, Peter Klinger of BDO Seidman, chimed in that auditors don't usually devote the same amount of attention to footnotes as they do to financial statement amounts (not at all comforting, Ciesielski notes, to investors who often rely on footnotes to value stocks).
However, Professor David Larcker, one of the conference organizers, reminded the panelists that since 1997, there has existed a body of academic literature showing opportunistic and thus potentially abusive pricing of options, Ciesielski says.
Translation: There really is no excuse that overpriced auditors didn't take note of these studies and laser in on potential miscreants' option accounting. Heck, even the SEC uses academic literature for sussing out problems, Ciesielski adds.
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richie
Senior Member
139 Posts |
Posted - 11/08/2006 : 8:18:05 PM
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| well, I guess we will all find out...NOT |
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havocstarter
Member
6 Posts |
Posted - 02/18/2007 : 7:46:20 PM
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| With so many "professionals" on board, hasn't anyone heard about the concept of an "arms Lenght transaction". To me it's like closing the barn door after the animals have escaped (no pun intended!) |
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EverettsPride
Advanced Member
1140 Posts |
Posted - 02/19/2007 : 01:30:17 AM
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There has to be another choice. I think it was necessary but not on the up and up.
Sally |
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Court4Fred
Advanced Member
1201 Posts |
Posted - 02/19/2007 : 09:16:39 AM
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| Havoc - We've all heard of "arms-length transactions" - they ensure that ethical boundaries are maintained during financial transactions through an independent body ; it's the hallmark of good governance. This administration wants the appearance of such ethics (the audit) while "french kissing" their vendors (pun intended) (see bidding irregularity raised at previous BOA meeting) |
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To Audit or Not to Audit?
