Via
Liberal Conspiracy, a UK blog about auditing points out a story that got almost no publicity - auditors admitted to covering up UK banks' problems, because they'd been told (when others hadn't) that the government would bail the banks out. This, of course, gave a flase picture of the banks' viability.
Lords accuse auditors of deceiving investors
The Lords' Economic Affairs Committee criticised auditors for signing off on banks' accounts on the basis the UK Government would prop up the banks.
"Your duty is to report to investors the true state of the company. You were giving a statement that was deliberately timed to mislead the company and mislead markets and investors about the true state of those banks and that seems to be a very strange thing for an auditor to do," said Lord Lipsey.
...
"Going concern (means) that a business can pay its debts as they fall due. You meant something thing quite different, you meant that the government would dip into its pockets and give the company money and then it can pay it debts and you gave an unqualified report on that basis," Lipsey said.
Lord Lawson said there was a "threat to solvency" for UK banks which was not reflected in the auditors' reports.
"I find that absolutely astonishing, absolutely astonishing. It seems to me that you are saying that you noticed they were on very thin ice but you were completely relaxed about it because you knew there would be support, in other words, the taxpayer would support them," he said.
http://www.accountancyage.com/aa/news/1900246/lords-accuse-auditors-deceiving-investors(Lawson was the Chancellor of the Exchequer for most of Thatcher's government)
I’ve asked the question many times why there were no “going concern” opinions for the banks and other institutions that were bailed out, failed or essentially nationalized here in the US. I’ve never received a good answer until now. In fact, I had the impression the auditors were not there. There has been no mention of their presence or their role in any accounts of the crisis. There has been no similar admission that meetings in took place between the auditors and the Federal Reserve or the Treasury leading to Lehman’s failure and afterwards. No one has asked them.
How could I been so naive?
...
What is the recourse for shareholders and other stakeholders who lost everything if the government was the one who prevented them from hearing any warning?
Certainly the auditors are now more inside the room than outside. I never take them for toadies, just standing in the corner waiting for their orders after the big boys talk, even though others have said I give them too much credit for being strategic. Their complacence is calculated. They are much too tied into the work, and the millions in fees, that have been generated by the aftermath of the crisis. Are the millions in fees for supporting the Treasury and the Fed’s cleanup of the crisis their reward for going along? Is this the same acquiescence that doesn’t seem to bother their UK colleagues one bit?
http://retheauditors.com/2010/11/28/big-4-bombshell-we-didnt-fail-banks-because-they-were-getting-a-bailout/And the ultimate "the public (ie the shareholders) should be kept in the dark about about problems" comment:
John Griffith-Jones, chairman of KPMG in Europe, said the banking industry is built on confidence and that full disclosure is absolutely fine in a stable environment.
"Come a crisis, the government of the day and Bank of England of the day may prefer the public not to know... to control events in those circumstances," Griffith-Jones said.
http://uk.reuters.com/article/idUKTRE6AM5RD20101123?pageNumber=2
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