Comments on: Whither Ernst & Young and Linklaters? http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: BHOlied http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-22096 Mon, 20 Dec 2010 14:25:01 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-22096 If you value competition you want E&Y to survive, there are 4 major accounting firms right now: EY, PWC, Deloitte and KPMG. Grant Thorton is a distant fifth.

These firms make amazing amounts of cash and the average partners income would make you cry. If you think that EY should go down becaue Andersen went down well thats just foolish. Three large firms would only increase the profits of these firms. Competition is slim these days.

Andersen went down because there was a crisis of confidence, not because their audit proceedures were faulty or anything systematic. Each office and you could argue each partner have certain independence to customize an audit to their liking. One partner, or a handful of partners or even an office being lazy or even corrupt does not mean an entire GLOBAL accounting firm should suffer a similar fate.

These firms are in every major city in the world – do the Toronto, Sydney, Moscow, Madrid, Johanesburg E&Y offices have anything to do with Lehman in NYC?

Andersen never should have failed…neither should E&Y. Do you know how many partners at Andersen were reprimanded, who lost their CPA license? Very very few.

They should go after those responsible for the shoty auditing with everything they’ve got but the firm itself should not fail as a result.

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By: Ed2010 http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12777 Thu, 18 Mar 2010 12:00:24 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12777 Felix, I think the point you are missing is that under English law the transaction IS (probably) a true sale. English law is different from NY law, which is why no NY firm would issue the opinion.

There’s nothing “ludicrous” about a law firm in a different jurisdiction giving an opinion that couldn’t be given in the US on account of the two countries having different laws.

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By: dsquared http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12678 Sat, 13 Mar 2010 14:44:55 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12678 Linklaters are in the clear I would bet. They’re a law firm, not an accountancy firm, and it’s mentioned in the report that they specifically didn’t give an opinion on the status of Repo 105 under US GAAP (why would they?). Their opinion was about whether it constituted a true sale under English law (it is a bit irksome that the report keeps referring to “UK law”, although the only people who will really care are any passing Scots). They even specifically said that their true sale opinion would be invalidated in cases of sham transactions. E&Y should probly be worried a bit more, because they did give advice on the actual transactions in question. But even they might get off, because while it’s very very prescriptive, US accounting law isn’t actually very good at closing down loopholes and doesn’t have a catch-all “true and fair view” to rule out bed&breakfast transactions.

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By: sian http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12677 Sat, 13 Mar 2010 11:27:35 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12677 According to ‘The Lawyer’ Magazine, “Linklaters is also E&Y’s principal corporate adviser” , did this close relationship play any role?

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By: slowlearner http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12676 Sat, 13 Mar 2010 00:33:22 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12676 Biglaw has long since been corrupted. Big firms are all about profit maximization. Professionalism is a fairy tale that some of the older lawyers continue to recite to themselves.

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By: slessard http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12673 Fri, 12 Mar 2010 23:24:37 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12673 I thought it was the conviction for obstruction of justice, in regards to shredding evidence related to the Enron audits, that led to the downfall of Arthur Andersen.

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By: MattJ http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12670 Fri, 12 Mar 2010 21:44:30 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12670 Given the Arthur Andersen precedent, there is no valid reason that E&Y should not face an equal or more drastic fate. If they do not, I think it will be clear that the accounting death penalty is off the table.

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By: najdorf http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12669 Fri, 12 Mar 2010 20:01:19 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12669 Before we go too hard on the lawyers, let’s note that Lehman went to Linklater’s because no U.S. firm would give them the opinion they wanted. Given that they were trying to move billions of assets off-balance-sheet, it’s safe to assume that they shopped around pretty aggressively in the U.S. for a way to do so and would have paid well for it. Nationwide, lawyers said “That’s nice, but we have laws”. I also assume that English lawyers aren’t simply more corrupt than U.S. lawyers, so there must be some aspect of English law that makes the transactions defensible – perhaps England should remedy it.

Ernst and Young, on the other hand, said it was fine to temporarily transfer U.S. assets to Europe in order to evade U.S. accounting rules and disclose materially misleading leverage levels – without even flagging that the company was doing something unusual in a footnote that no one would read. That’s seriously problematic. If your principal place of business is in the U.S. and you hold assets there, dropping them overseas for a few days so you don’t have to talk about them to investors frustrates the entire purpose of accounting.

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By: HBC http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12667 Fri, 12 Mar 2010 19:13:42 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12667 Enron brought a lot of entities down, and it’s the sad fact that no decisive repercussions were filed in a timely way by aggrieved parties (e.g. State of California) which left the door wide open for a succession of emulators who are only now being – at worst – singly chastised, yet seldom held to full scrutiny and account.

The enormity of Enron is still with us in mutations such as [insert names of just about all TBTFs, their bond-raters, lawyers and accountants here] and it’s never going to go away as long as there is the slightest civil tolerance for white collar crimes that are “too big to prosecute”.

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By: DanHess http://blogs.reuters.com/felix-salmon/2010/03/12/whither-ernst-young-and-linklaters/comment-page-1/#comment-12665 Fri, 12 Mar 2010 18:04:59 +0000 http://blogs.reuters.com/felix-salmon/?p=2951#comment-12665 We await your return and perhaps some kind of recanting of the ridiculous statement you made.

Many people have been bothering you for weeks and months regarding CDS counterparties and then you broke your silence on that with this made-up statement:

“Indeed, it’s the long-only investors who are on the other side of the trade — institutional investors who wrote CDS rather than buying bonds, because the yield was higher or because they simply couldn’t locate bonds to buy, or just because CDS are more liquid. For those investors, CDS are bond substitutes, and they’ll buy a CDS for the full cash value of the amount being protected, just as they would a bond. They’re not leveraged.”

Of course you invented this explanation. It cannot be true.

If the end-underwriters of CDSs were merely bond buyers who “buy a CDS for the full cash value of the amount being protected” as you say then the value of the CDS market would be billions and not trillions.

If this is not a made-up statement, please show us some evidence, any at all, that it is true. This is like Stephen Glass, online edition.

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