Auditors face prosecution
(WSJ): New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said. State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.
Category: Business
Very interesting. There is a very big concern if one of the big 4 fails and in the light of the huge amount of litigation outstanding there is a possibility that one may fail. About 20 years ago we had the big nine which was a good number of firms to choose frm. The reduction to four can be solely attributable to the desrire not to be left at the bottom. Hence mergers such as PwC Coopers and Deloitte Touche. These mergers did nothing for the public. Unfortunately the next tier firms are far to small to take on the big four.These very firms wish to cap their liability but with at least three of the four entrenched in the Madoff fiasco, why should they. What they do need to do is to change their audit approaches.