Posted on 03/13/2002 2:28:03 PM PST by Roger_W_Isom
LOU DOBBS is reporing that ERNEST YOUNG one of the TOP FIVE ACCOUNTING FIRMS HAS REFUSED TO ACQUIRE AA!!!!! This is NOT good NEWS!!!! if YOUNG refuses to accept AA offer to sell itself to YOUNG that means only one thing FOLKS!!!!
AA is in FAR more seious shape then we realize and we could be looking at the other accountting firms REFUSING TO ACQUIRE AA as early as Mid April!!!!
Who owns the files (the unshreaded ones, such as they are)? The rules may have changed since my days in public accounting, but the workpapers, etc, become the property of the firm. Just because you get the customers doesn't mean you get the records, does it? And who wants to reconstruct a couple of years of financial data just for the purpose compiling comparative financial statements?
. . .I know you know. . .having been with E&Y that it is 'Andersen' not Anderson. . .as to the numbers, believe in '98', Andersen was still 'Arthur Andersen' and still under the 'umbrella' with Andersen Consulting; now Accenture. . .after the split, 'Arthur' was dropped and Andersen was left considerably smaller and not just in numbers. . .
Think it is sad the ugly and nasty scapegoating of all things evil onto 'Andersen'. . .simply not the 'truth of the matter'. . .
What do you think about making all AA partners disbursement over the time period liable for the effects of non-standard and negligent (or corrupt) figures in one of their member's audit? If not in this case, in the future? After all, if an AA partner is given credibility from his LLP association, shouldn't he should share in that liability (up to the amount of his income?)
Dream on.
In a former career, I had a lot of dealings with companies in trouble. I can assure you that the people who screw up large organizations (public or private) are simply not held accountable.
These A.A. potentates will skate with millions, tens of millions, or possibly hundreds of millions.
Because they are "corporate celebrities," they will be hired by other corporations despite their obvious screw ups at their previous assignments.
They will also not be punished by the law.
Period.
If anyone goes to jail over this, it will be some mid-level milquetoast who signed "this" when one of his Godfathers told him to "sign this".
In the 50's and 60's, the captains of industry were usually top drawer individuals. That era is sadly over.
One of the celebrated CEO's of the age is nicknamed "Chainsaw Al". And he isn't unique.
The shareholders of these corporations need to wake up and de-louse their CEO's. Otherwise, the government will do "something". And it won't be pretty.
Basically, it's just a matter of garden variety capitalism: anything that anyone anywhere wants to buy, somebody somewhere is willing to produce and sell to them at some price. Only catch is, the deal has to result in a reasonable probability of improving the financial position of both parties, or it just won't happen. If Company A wants to buy struggling Company B, and struggling Company B needs and wants a buyer, then Company A, along with the public and/or private financial markets which will provide the financing for the acquisition, starts dictating the terms on which it would be willing to buy Company B. If there is reason to believe that there may be some significant liability problems popping up down the road from Company B's past activities (not necessarily illegal), then some sort of control over that potential liability will have to be part of the deal. A customized insurance policy is one way of accomplishing this. The insurance companies who underwrite policies like this are reinsured by reinsurance companies, and so are quite able to take a big hit now and then. But in the case of AA, the situation is so bad already, has such a high risk of getting much worse, and there is so little difference to a buyer between the value of the firm as a going concern and its readily available parts (clients and employees), that there's no way to structure a viable policy.
Like any insurance policy, this sort wouldn't be open-ended -- it would insure up to a certain amount. But if AA as a going concern is thought to be worth say $500 million, without the liability consideration, and the buyer and the financial markets determine that they would need liability insurance for at least $5 billion, and the insurance company is willing to provide such insurance at a rate of $125 million for each $1 billion of coverage, then the math goes underwater -- no deal. On the other hand, if the target company was worth $500 million liability free, the buyer determined the need for liability insurance for up to $3 billion, and an insurer was willing to provide a policy for $150 million per billion . . . voila! The math works, the buyer will offer to pay $50 million for the target company, and will pay another $450 million for the necessary insurance -- $500 million value purchased for $500 million. Theoretically, the acquirer gets bigger and more profitable, the insurer comes out ahead (though not by anywhere near $450 million, since they have to factor in expected loss and reinsurance premium), and the target company's going concern value is preserved -- everybody wins! Ain't capitalism nifty?
You could be right, I suppose. I notice that many others on the thread share your view.
I think AA should have been spared the circus in Washington, though, since the Members of Congress expressing their "outrage" and browbeating the hapless stream of AA and Enron execs from the safety of their committee chairs have far from clean hands. Congress basically roasted these guys in order to get at Dubya, but they appear ready to give Global Crossing, a company with stellar Democratic Party connections, a free pass, even though the financial transactions conducted by those bozos are at least as dubious. Has anybody read any scalding news reports on the firm auditing Global Crossing? I don't think so, because to my knowledge none have been written.
Not unusual. Doctors routinely buy "tail coverage" when they leave a practice. This
covers them against future malpractice suits. Tail coverage is, or can be, separate from
regular malpractice coverage.
What you say is true. However, the politicians and Attorneys Generals and private lawsuits will make it almost impossible for them to survive.
What will really finish them is that because AA has been the auditor for the largest corporate bankruptcy, Enron, AA was also the auditor for the forth largest corporate bankruptcy, Global Crossing, and they were the auditor for the largest non-profit bankruptcy, ?Baptists of Arizona?.
Large investors will simply not put money into a corporation that uses AA as it's auditor. No corporation will keep a auditor that drives away investors.
Guess which one the county commisson selected? Well, come the day of the audit, they send a team of rookies fresh out of college to poke through all our records, ask questions and generally waste 10 hours or so over the next week.
Then they retreat to the HQ and volia', a month or two later they produce a report for the commission which can find no wrongdoing but which dwells on penny-ante stuff like we don't have three people opening the mail (in a two person office), we're not letting bids out to enough contractors, particularly those with political connections and other horse manure.
Of course, shennagians which we reported and would not cast a good light on their political bosses went unmentioned.
Then they have the audicity to sign the names of the owners to the report as if they did any of the actual work. I told the rookies who sat in on the meeting that I hoped they would be able to find honest jobs when the firm went the direction Arthur Andersen appears headed now.
lol. arthur? arthur, is that you?
lol.
ain't the collective wisdon of fr nifty?
in fact, it is guttenburg writ large.
I think that the example of of AA going down will be more effective in improving accounting standards than would new laws. I don't consider myself an anti-government extremist. If the market is failing to discipline companies which engage in bad practices or sell bad products and services, one might consider government intervention. But here is a case where the market is working.
I do understand that there may be some folks here who feel that some legal action should be taken against those who caused them to lose money. Some wish that Enron's phoney business practices had been caught a few years earlier, so that Enron would have fallen before they had purchased the stock, only hurting others. However, it's unrealistic to expect that a new law could decrease overall market risk.
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