With one action, I could reduce the financial bullshit in the country

[AllentownJake]

Revoke the LLC/LLP status of every major auditing firm. In a general partnership, you are on the hook for the negligence of your partners personally. In an LLP/LLC you are not.

It is amazing how much shit has gone on, since auditing firms went from General Partnerships to LLCs and LLPs.

I have this pretty good feeling if all the partners in the accounting firms in the country knew, that their partners actions could cost them their house, the auditing firms partners would probably take their jobs a little more seriously, and be a tad less friendly to the people being audited.

[WonderGrunion]

1. That's actually a really good idea.

It would definitely jump start a return to accountability in accounting.

[AllentownJake]

2. There is no reason why any professional group

that agrees to work together as a partnership, should have limited liability on anything.

[Greyhound]

3. Yes, a really good, and achievable, idea. n/t

:kick: & R

[Ozymanithrax]

4. How do you do that, exactly...

I mean, you could rewrie the laws, and change the rules by which those companies operate, but those that already exist would continue to exist.

[wtmusic]

5. There would be a window where they would have to convert

to a regular partnership or corp.

I like this idea.

[AllentownJake]

7. Simple

As of 1/1/2011

All LLC and LLP's in the accounting industry are prohibited from offering auditing services.

What the hell is a 5 year partner in auditing going to do? Sell consulting services? The only reason people buy that shit is to make their auditors happier.

[Joe Chi Minh]

6. Bit unsporting though. How would it go down at the country clubs? That's another

knotty one Obama will have to wrestle with.

[AllentownJake]

8. Barack would never do that

They are good businessmen and he doesn't begrudge them for trying to make a living by pretending they don't see their associates misbehave when they share in the profits.

[dave29]

11. So on the flip side how many good people would you be willing to see go down?

Either way (which is my point) good people lose out when others make bad decisions.

[AllentownJake]

12. Someone who is a partner in an accounting firm

Is compensated extremely well. For that compensation, here is what I expect.

1) You do your fucking job and supervise and train those under you adequately.
2) You watch the people who are carrying the name of the partnership like a hawk, because if they fuck up you go down as well.

I'm not talking about grocery store clerks here. I'm talking about people who get very nice things for doing the job they do.

Your paid to be the financial police force of capitalism, you got one hell of a responsibility to investors, employees, and the general public. Failure to meet that responsibility means you get fucked.

You want the big house, you can have it, but that big house comes with a shit load of responsibility to the public, and also a pretty severe punishment if you don't live up to it.

[dave29]

17. So, the more important the "fucking" job, the more people should

have to pay for the mistakes of others? I'm not disagreeing with you, just impressed you think this is remotely feasible. And I'd also point out, probably to your chagrin, that this would be akin to treating a corporation like an individual. The sins of the one = the sins of the many. Think it through, and you can see just how easily this same system could be manipulated. In order to insure themselves against the malfeasance of others, folks would demand a hell of a lot more than they are making even now.

[AllentownJake]

19. Accounting firms are not allowed to form corporations

There was a reason for that, it was changed to LLPs and LLCs in the 1980s.

As for whether or not it is feasible....it was the system for over 200 years before the law was changed.

Somehow, I remember people trusting balance sheets a lot more back than.

[dave29]

21. there were not a lot of corporations 200 years ago...

but I am impressed with your age.

My point was not about Accounting firms but the concept in general.

[AllentownJake]

23. This is soley limited to one profession

LLPs and LLCs were prohibited for accounting firms till the 1980s.

The reason being was, the idea if one of us is dishonest we all pay, so we'll make sure we are all honest.

[dave29]

26. but malfeasance and greed are far from limited to one profession.

I understand your rage at banks and accounting firms. It is good that your moral compass is set true. But nothing in the history of mankind has "fixed" this problem

[AllentownJake]

27. This will make things better

There will always be a dishonest scumbag who slips through, we shouldn't have a system that promotes them.

[dave29]

29. If there will always be a dishonest scumbag who slips through,

there will always be a good person (or many) penalized right there with them, under your plan.

[AllentownJake]

33. Everything in society is a cost benefit analysis

Do you think the current auditing companies are doing their jobs. I do not. When I look back to a time when these things happened less, I see that the partners were on the hook for each other's actions.

You choose to be in a partnership, and you should choose your partner wisely.

[dave29]

38. Tell that to Jesus.

Listen,

I'll boil this down real easily, because I think the reality of it is that you are walking a very fine line with the concept we call "guilt by association," which has had some very negative consequences throughout history, whether it be with accounting firms or people having different color skin, or body parts. We cannot, as a society, ever hope to achieve justice by punishing the innocent. My take on this is that you very much want to do the right thing, but are are willing to "cut corners" yourself to get there. If everyone was on the hook for everyone else, the result would be McCarthyism, not financial utopia. It will not work.

I also think you believe anyone involved in certain jobs of power (be it the President, or Bank President) are by default guilty due to their "quest for power" or whom they associate with (Rahm being the target of so many here). Is the system working now? Of course not, but your solution to this problem will bring just as much pain.

[AllentownJake]

41. What the fuck are you talking about?

I'm a professional, I've been doing auditing for a few years. If I decided to go back into public accounting and work my way up to partner, I'm fine with my ass being on the line for the people I freely choose to associate with.

This isn't McCarthyism. This is the way our system ran for the majority of it's existence.

I choose to accept being a partner in an accounting firm. With that, I choose the risk and rewards for that position of trust, authority and wealth. If I fail to monitor the actions of my fellow partners, I go down with the ship with them for failing to meet the requirements society has said I need to meet to be in that position of authority. One of those requirements is to make sure the people who I'm sharing my profits with from auditing are doing their fucking job.

We lock kids up in the country for years for a small amount of cocaine while powerful people turn their back on others doing the wrong thing which hurts millions.

Screw me the Jesus line.

[dave29]

44. Yes, we all know what you do.

"If I fail to monitor the actions of my fellow partners, I go down with the ship with them for failing to meet the requirements society has said I need to meet to be in that position of authority. One of those requirements is to make sure the people who I'm sharing my profits with from auditing are doing their fucking job."

I am sure you will do very well. Let me know how it goes.

[AllentownJake]

46. I'm always amazed

at the people on here, who object to people rewarded by society, taking a little bit more responsibility for the well functioning of it.

:hi:

[dave29]

49. as always, we're on the same team.

You are SO not getting my point. But that's OK too.

I'll say this and we can drop it. What happens when Partner A & B begin to suspect Parter C of wrongdoing (under your plan). They approach him and he denies it. Nothing can be proven. Partner C (in reality) has been having trouble at home but does not care to discuss it with his coworkers. Partner A & B do not buy his story because they fear being taken down by Partner C's erratic behavior. There is now an incentive for Partner A & B to do everything in their power to "expose" Partner C's supposed wrongdoing. This negative incentive, that not only am I my brother's keeper, but his watcher, winds up driving Partner C out of the firm, where he is now blacklisted. His career now ruined, he gives up on life, putting his kids on the street, where they are arrested for Cocaine posession (sorry had to throw that in there). Now extrapolate this across a gigantic accounting firm.

The best intentions can still lead to mistrust, fear and yes, McCarthyism.

:hi:

[AllentownJake]

50. They peer review his work with a fine tooth comb

Auditing requires documentation. It is called workpapers. What do you think we do, walk around, look at shit and say this is ok?

If he can convince two of his associates they aren't losing their house...I'd say he's pretty good.

They don't understand something, they ask him questions...seems like a pretty good system to me.

The awesome thing about it is, shhhh..it used to work, it is nothing new, we did it for years and people trusted financial statements.

[dave29]

53. I guess maybe I didn't understand

that auditors actually love a good audit (of) themselves. I guess I chose my profession wisely! If you have nothing to hide, right? What could possibly go wrong

:)

[AllentownJake]

55. When I do a good audit

I'm as proud of it as Leonardo Da Vinci was probably as proud of the Mono Lisa or Michelangelo was of David.

The current system encourages people to do bad audits.

[dave29]

57. so it will be that much more painful to you when

Partner A & Partner B turn out to be bad apples who decide with Partner D-H that you are getting in the way of a good thing, and force you out of the job by falsifying some of your workpapers. Now all of the partners are corrupt once again, and you are on the street, screaming about how broken the system is.

[AllentownJake]

58. Partner A and B are going to go broke pretty fast

Remember that liability extends to your personal assets.

I'll be happy, that I can go somewhere else and still live in my house.

Maybe go work for a law firm, giving expert testimony on why the other Partner A's and B's out there deserve to lose said houses.

[Joe Chi Minh]

73. You seem to think that fraud/massive incompetence in business and finance at a high level

are kind of 'cuddly' misdemeanours. They're not. They're singularly malevolent, vicious crimes against civil society - often amounting to mass murder. Wake up to yourself.

[Raineyb]

51. THAT is the way a partnership is set up. And people set up partnerships

for other business endeavors knowing full well what they're taking on. So why is it that you have a problem with the partnership form for accounting firms?

[AllentownJake]

52. If your in a professional capacity where you are giving advice or an assertion for a fee

You should be personally liable and anyone who is your partner, for if the assertion or advice you gave was proven to be negligent.

I'm not talking about Toyota here, the only thing that is offered here, is your assertion, you know what the fuck you are talking about.

[Raineyb]

59. I completely agree with you. What I don't get is what Happy Hippy's problem with it is.

A lot of small businesses use the partnership form it's not like you would be punishing the accounting firms you're just making sure that those who would defraud can't hide behind the corporate entity to avoid responsibility. I don't see the problem.

[AllentownJake]

60. In the 1980s

The firms weren't doing very well auditing wise and they were being blown up left and right.

It was a matter of professional competency and it was what should happen, the firms had a hard time understanding computers.

The older generation of accountants were quite distrustful, and honestly the last thing you want is a trusting auditor if you are the public. You want paranoid mean sons of a bitches.

The firms lobbied the government that they were critical to the system and needed to be protected.

LLC and LLP were the results, and ever since than, we've had more and more and more blow-ups.

Every firm should have been given the corporate death penalty after Anderson for one reason or another in the past 9 years.

These guys were too big to fail before the banks were.

[Happy Hippy]

22. wow

Yes, let's go back to the days before SOX too while we are at it.

[AllentownJake]

24. How effective has SOX been

:rofl:

The biggest financial fraud in history was committed Post-Sox.

[Happy Hippy]

31. HAHAHAHA Another DUzy!

SOX didn't apply to Madoff's fund.

[AllentownJake]

32. I'm not talking about Bernie here

Last time I checked. Lehman, Bear Stearns, AIG, Goldman Sachs, and a whole host of others were publicly traded companies.

Of course, at every auditing show I went to, they explained to me that they had developed the "best" risk management system in the world, generally followed by a Big 4 stooge trying to sell it to other companies.

:hi:

[Happy Hippy]

34. ...

Oh you mean "fraud" as in purchasing securities tainted by the likes of Fannie and Freddie? Oh, but they are GSEs! They couldn't be a part of the problem. :sarcasm:

The GSEs' government approved method of purchasing any piece of garbage on the secondaries and creating derivative securities purchased by the likes of the companies you mentioned is somehow fraud on behalf of the financial companies? There is a difference between mismanagement and fraud.

If Fannie and Freddie never existed, we'd never have had this mess.

[AllentownJake]

36. Funny they existed for 35+ years

and this is the first time this has happened.

:shrug:

Last time I checked, Fannie and Freddie haven't been implicated in purchasing fake insurance from AIG on products they were selling to their own customers.

It is going to be interested as defaulted mortgages come home if Freddie and Fannie audit the underwriting and make the firms who now own the originators eat the shit.

[Happy Hippy]

40. LOL! Wow, your quick ....

I'd say this catastrophe was 35 years in the making. Yes, the GSE's knew they had the protection of government - they are free to do whatever they choose - still are in fact. They just call up Obama, ask for billions and it's delivered. In fact, it's been stated that they are the beneficiaries of an open check book.

The reality is w/o Fannie and Freddie this would have never happened. Every aspect of the meltdown was tainted by the garbage that the GSE's dealt. Sadly, it's just too complex for most people to understand - thus the real crooks get off scott free.

[AllentownJake]

42. Welcome to DU by the way

I find your theory on the source of all the world's financial troubles being a GSE enlightening to say the least.

I think Mr. Beck has proposed that theory as well? No?

[Happy Hippy]

43. Oh, a fan of the GSEs I see.

I don't watch him, so I wouldn't know. However, please explain how this would have happened without the GSE's?

[AllentownJake]

45. I'm actually not that big a fan of public and private partnerships

However, this fraud that happened, would be impossible if you took any number of players out of the equation.

Banks justified increased risk with derivatives which are insurance, that requires no reserves.

Investment banks knowingly sold shit to their clients and didn't care.

GSEs provided a great deal of the funding for the operation.

Regulators ignored the few existing laws.

Auditors took management assertions on things too much at face value.

Hey if we were back at the standards that you had to put 10% cash money to finance a mortgage, show proof of consistent income, and everyone got a fixed rate, the entire thing would be fine. We got rid of that long ago because of wages that weren't keeping pace with inflation.

What GSE's are involved in the commercial real estate implosion that is ongoing as we speak?

[Happy Hippy]

47. Fair enough

You seem like a reasonable guy, Jake. We can just agree to disagree. You make fair points, but I politely disagree.

[Joe Chi Minh]

75. On what grounds do you disagree with his fair points?

[Zenlitened]

79. The Eating of the Shit has already commenced:

Fannie, Freddie Ask Banks to Eat Soured Mortgages

March 5 (Bloomberg) -- Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=114&topic_id=76476&mesg_id=76476

[Imperialism Inc.]

70. You have zero idea what you are talking about.

The derivatives that blew up were not in compliance with Fannie and Freddie guidelines so there was no way they can be the problem. It wasn't until 2006 that they started accepting some of the more crappy securities and even then they didn't accept the worst of them. You need to get your history straight. You are basically claiming that Fannie and Freddie's actions somehow transported themselves backwards in time. And even that won't explain all of the crap being bundled and sold that they never accepted.

[Joe Chi Minh]

67. Like your 'Walter' avatar (an unlikely avatar in the religious sense,

if ever there was one!). Fits your wry post to a tee.

Walter, ever the pragmatist in his own mind, would have understood. Reminds me of Milo Minderbender's words, when Yossarian catches up with him in Rome. "His parents were very rich. Well then, they'd have understood...." The lad had been killed by German planes dropping cotton-coated chocolates Milo had exchanged with them, or some such crazy scheme. But his heirs were going to be members of 'the syndicate' in his place! Oh happy dispensation of Providence!

[AllentownJake]

69. That is my favorite book

and some of the greatest source of wisdom in the world.

[Happy Hippy]

9. hmm...

Yes, the partners actions could cause an entire firm to collapse - Arthur Anderson, much? The actions of a handful of Arthur Anderson employees and partners caused the entire firm to collapse - they lost their license. There are several examples of firms facing huge lawsuits as we currently speak. I don't think firms the size of the Big Four should loose their LLP status - one poor choice by an engagement partner in New York could cause a partner in California to face personal liability - that's ridiculous. You can still sue the LLP, the personal assets of unrelated partners are off the table.

[AllentownJake]

10. Ahem

If I know that some asshole in California might cost me my house.

I'm going to make sure there aren't that many assholes. Trust me, when my personal assets are on the line because of your actions, it is in my best interest to be concerned whether or not you are honest.

The partners from Anderson lost nothing, they all went to the other four firms and it has been business as usual for 9 years now.

[Happy Hippy]

18. That's a DUzy...

Yes, all 85,000 Arthur Anderson employees that lost their jobs - they were all partners! LOL. With 1000s of partners all over the world, you have very little control over them by simply being another partner. It's likely a partner in Philly doesn't even know the partner is Dallas that is about to be sued. You do realize that these companies have thousands of partners. IRC, P Dub alone has nearly 10,000 global partners for its 160K+ employees.

How about we expect the PCAOB to do it's job?

I'm still laughing, "You watch them like a hawk"...LOL!!! There are thousands of partners at each of the Big Four firms. Why should one partner hundreds of miles away face lawsuits because of one bad apple out of the thousands of global partners.

[AllentownJake]

20. Well when Congress tells them not to

It is kind of fucking hard.

[Hissyspit]

13. Democratic Underground is a LLC.

[AllentownJake]

14. Is Skinner offering auditing services?

That is news to me.

[Sebastian Doyle]

25. No, but....

...you never know what that damn Grovelbot is up to. :evilgrin:

[AllentownJake]

28. DUzy

I heard he's working for PriceWaterhouse these days.

[Hissyspit]

35. I don't know why they chose to do it that way:

http://www.democraticunderground.com/about.html

[AllentownJake]

37. LLC is a legit form of incorporation for small businesses nt.

[Hissyspit]

39. I understand. I just don't know their specific reasons for doing it that way.

Probably to protect against lawsuits based on posts here.

I just thought it was funny in case you weren't aware.

[AllentownJake]

48. For some reason

I doubt Skinner can screw something up and crash the entire world economy with DU. But you never know.

[Hissyspit]

61. Well, hell, then what are we doing here?!

:)

[AllentownJake]

62. I was gauging people's understanding of my proffession's role

in what has happened to this country and understanding of my proposed solution before I take it other places.

You?

[Hissyspit]

63. I think you're taking me way too seriously, Allentown Jake.

Nothing I've posted was meant as criticism of what you posted. I know that DU is not a major auditing firm. Sorry for any confusion.

[AllentownJake]

65. Oh sorry, this is my topic

The one I feel most passionate about. I feel very personally angry at what my profession allowed to happen to the people of this country.

I sometimes lose my sense of humor on it.

[Hissyspit]

66. No problem.

I can see where my light-heartedness was not as clear as I maybe thought it was.
I think what you say is a good idea and I rec'd your post.

[PufPuf23]

15. Nice Idea!

I do not know your background but you are often correct in your assessments.

Thanks.

[Jakes Progress]

16. It would work. Therefore it won't be done. nt

[naaman fletcher]

30. good point. /nt

[Mike 03]

54. This is an extremely good idea. Can we also hold the Rating Agencies

liable for their ratings when it comes to things like AIG and ENRON stocks and bonds?

Great post.

[AllentownJake]

56. Fine by me, make them partnerships too

Although, they will lower the US debt rating and destroy the US government five minutes after you do that.

[truedelphi]

64. Within a week, Congress would have some bill in the mill that allows for

Firms to have the same protections, but with another name.

They are very good at re-inventing the illegal wheel, no matter how many times it is prohibited.

[JoeyT]

68. I thought you were going to say

"Everyone with an MBA stand against that wall for a minute." but making the people that are supposed to be monitoring things accountable for malfeasance would work. :silly:

[snot]

71. The whole point of those AND corps is to shield their execs from liability.

And the whole problem.

So if you're going to revoke liability for execs of LLC's and LLP's, why stop there?

[upi402]

72. The rule of law, enforcement, and accountability in America?

What, you think this is Thailand? :rofl:

[Fumesucker]

74. The rule of law, enforcement, and accountability are all very strong in America..

If you're poor..

In fact we have a higher incarceration rate than any other nation on the planet.

[upi402]

77. I agree

But there are attorneys here that disagree that race is a factor. :shrug:

[DisgustedInMN]

76. Jake bangs another one...

.. out of the park. How many scumbags watched Bernie Madoff and other scumbags like him rip people off and never said a work about it? How many tillion$ have been stolen from us by these bastards? Why aren't they all hanging from the end of a short rope?

[donco6]

78. True. Our auditors spend more time telling you what they WON'T attest to -

And every year, they lay more and more stuff on my back. They do NOTHING except post wrong entries that I have to find and fix later. Worthless sacks of shit.