For those of you that may have thought that my grumpiness may have been tempered a bit by the advent of the holiday season…Bah Humbug! There is just so much accounting and financial reporting nonsense out there this quarter, that I have been simply overwhelmed by stuffing stockings with lumps of coal for my favorite global accounting firm (GAF) partners, and the humbug large bank clients they serve.
Let’s begin with Jonathan Weil’s recent discussion of Morgan Stanley’s “immaterial” $9.2 billion correction of an operating cash flow (OCF) classification error. The problem? Morgan Stanley (MS) accountants didn’t formally restate the Company’s financial reports for the error as required, instead opting for the sleazier “stealth restatement” route on the basis of immateriality. Where were the auditors? Well, the auditors actually appear to have discovered this error…my heart be still. But MS has been “audited” by Deloitte (of recent PCAOB fame) since 1997 according to Audit Analytics. Why should I be surprised that a GAF auditor actually found something, then looked the other way?
Several years ago, the Grumpies were pretty hard on the agencies tasked with enforcing audit quality and ethical accounting behavior in the United States (see Paper Tigers: The U.S. Accounting Oversight Regime). But my how times have changed…the “Paper Tiger” has become “Tony the Tiger,” and that is just grrrrreat! What am I talking about? Well, it has been a really bad month for the global accounting firms (GAFS).
When we think about the worst U.S. accounting scandals ever, those new to the profession usually cite the Lehman collapse or Madoff scam of 2008, or maybe even the Enron tragedy in 2001 which has become symbolic for bad accounting and auditing. And those of us with gray (or no hair) might recall the ZZZZ Best, Crazy Eddie, or Equity Funding debacles. However, many of us may have missed what may be the largest and longest running accounting swindle ever, one that finds accountants scamming accountants.