A few articles of interest out today on the alleged insider trading by former KPMG partner Scott London.
Wall Street Journal – Question in KPMG Case: Why?
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Background articles emerging on KPMG insider trading fiascoRead More »
Background articles emerging on KPMG insider trading fiasco Read More »
“How will this look on the front page of the Wall Street Journal?” is a handy question to use when pondering what to do about an accounting or auditing issue. It’s useful for any business decision.
I’ve used that for myself and as an illustration for clients and other people I’m talking to. It provides a good way to frame up how a decision will look to other people.
For the second time this week, Mr. Scott London, formerly a partner at KPMG, has seen how this question plays out.
The front page of the Wall Street Journal today has a headline across three columns:
How would you like to be the subject of the article?
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Failing the front-page-of-The-Wall-Street-Journal test twice in one weekRead More »
Failing the front-page-of-The-Wall-Street-Journal test twice in one week Read More »
Let’s examine the consequences on the horizon for Mr. Scott London, former KPMG partner, as a result of his indictment for allegedly trading on insider information. I’ve discussed that here and here.
For some time I’ve been writing on the tragedy of fraud with a focus on the consequences that befall the perpetrator. I’ll continue that discussion by looking at the public reports for this situation.
Is possible jail the only bad thing on the horizon? Not quite. There’s a long list of bad things in view.
As you read this, keep in mind my comments include a mixture of reported facts and my guesses & assumptions. I’ll try to label the discussion accordingly.
Let’s explore the consequences, assuming the reality is the same as what has been reported. Here’s the list I can think of:
Jail time
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Consequences – insider trading edition #1 Read More »
Former KPMG partner Scott London was arraigned today according to several news reports. He is free on $150,000 bail.
His attorney suggested Mr. London will plead guilty at the May 17 hearing.
Check out:
An idea on why there’s the admission during first interview and likely fast guilty plea
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KPMG partner arraigned – might plead guilty – hint on how to avoid jail time?Read More »
KPMG partner arraigned – might plead guilty – hint on how to avoid jail time? Read More »
The SEC has filed a civil action against former KPMG partner Scott London and his golf buddy accusing them of trading on inside information.
You can read the SEC’s press release here and see a copy of the complaint here.
You can read the WSJ’s article here and find the SEC’s complaint here.
The SEC alleges that the golf buddy made illegal profits of at least $1.27M (paragraph 7 on page 2).
Whether the SEC’s or FBI’s estimate of gains is correct, my recollection of several on-line articles suggests those amounts indicate the pair is exposed to some serious jail time.
Related articles in reverse chronological order:
SEC files complaint against former KPMG partner Read More »
The KPMG insider trading fiasco is far worse that indicated in first reports.
The Wall Street Journal had the first report I saw announcing Scott London, regional PIC at KPMG in LA has been indicted for securities fraud on Thursday morning – Substantially expanded article from the first announcement is here: Former KPMG Partner Charged.
The indictment is available on FoxBusiness – Ex-KPMG Exec Charged in Insider Trading Scam.
The indictment has a number of interesting comments: …
A now-former partner of the LA office of KPMG, Scott London, is in boiling hot water for alleged insider trading.
Lots of news out. I will give a general overview. Lots more news will be out in the next few days, I’m sure.
Brief outline
He allegedly gave ideas about companies where he was the audit partner to a buddy at a golf club. The feds tumbled to odd trading patterns in said buddy’s portfolio and investigated.
The former partner hired an attorney before his first interview with the FBI and SEC. That’s a good move.
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Initial highlights of insider trading by KPMG partnerRead More »
Initial highlights of insider trading by KPMG partner Read More »
If you want to test a decision, ask yourself how this will look on the front page of the Wall Street Journal.
We see an example of that test in today’s WSJ.
Front page.
Above the fold.
Big font covering 4 columns.
Here’s the headline:
Partner who Audited Herbalife and Skeechers Admits Giving Stock Tips to Friend
How’s that looking?
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Live example of the ‘Wall Street Journal’ test Read More »
Bribery is a particularly difficult fraud to prevent or detect.
Charles Hall has some tips at CPA-Scribo on How to Detect and Prevent Bribes.
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Tips for preventing bribes Read More »
The AICPA’s Professional Ethics Division has published their report on most common ethics violations in the last year.
About 40% of the cases investigated by the Division deal with audits of government agencies and NPOs. That’s a depressing portion of ethical issues arising from those two areas. I doubt that is reflective of portion of total audits performed.
That statistic should end the perception that audits of government agencies and NPO don’t have risk. If there is a disproportionate possibility you will wind up in front of an AICPA Ethics hearing, you are not dealing with a low risk audit.
Their report provides a good survey of the major issues.
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Most common audit deficiencies that generate ethics violation investigationsRead More »
Most common audit deficiencies that generate ethics violation investigations Read More »
Previous post raised the question whether it is possible that current accounting rules make a modern balance sheet so complex that it is essentially unauditable.
Another item described by Grumpy Old Accountant Anthony Catanach’ column Is FASB Killing the Auditing Profession? is the PwC audit tool of cumulative audit knowledge and experience.
Audit team experience as substantive assurance?
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Are balance sheets unauditable? 2 Read More »
Is it possible that current accounting rules make a modern balance sheet so complex and judgment filled that it is essentially unauditable?
The answer is a hesitant yes, if I’m correctly reading Grumpy Old Accountant Anthony Catanach’s column Is FASB Killing the Auditing Profession?
He contrasts two parts of the PCAOB reports on inspections of PricewaterhouseCooper (PwC). The PCOAB released two consecutive inspection reports for the firm.
My understanding is the confidential portion gets released if you don’t fix the issues by the next inspection. That means to get two consecutive reports released means the problems identified during inspection one weren’t fixed before inspection two and still had not been resolved during inspection three. Ouch.
Reduce partner time on complex audits
Prof. Catanach combines two issues.
First, the firm’s response says the issues involved are …
Are balance sheets unauditable? Read More »
The post “Re-Structuring the Audit Profession: The UK’s Competition Commission Hunts the Woozle” by Jim Peterson discusses weaknesses in research behind the Commission’s conclusion that mandatory auditor rotation is necessary. He says:
Diligent digging through the Commission’s augean piles of paperwork makes clear that its ostensibly supportive “research” ranges from the shallow and irrelevant to a results-driven reflection of its confirmation bias.
Wow. Let’s unpack that:
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2 questions for those advocating mandatory auditor rotation. My research on the issueRead More »
2 questions for those advocating mandatory auditor rotation. My research on the issue Read More »
The following article is by Amy Wilson, speaker and staff accountant. It is printed with permission of Mrs. Wilson.
For ease of reading, I won’t put the full article in quotes. Here is her story:
My name is Amy Wilson. I am a wife, a mother, an accountant — and an ex-convict.
Early on as a struggling single mother, I wanted a better life for my children, so I went to night school at the University of Indianapolis and earned my bachelor’s degree. For the next 16 years, I worked hard to achieve a respected position in the corporate world. I started in my teens as a cashier at a car dealership. Next, I worked as a payables clerk for a major hospital in Indianapolis. Finally, degree in hand, I became a staff accountant for a large manufacturing firm. Seven years later, I was hired as an office manager for a small manufacturing business.
For most of my life, I was an overachiever, an attribute that eventually led to my downfall and put me behind bars, a convicted felon.
My slow decline into theft
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One accountant’s journey through fraud, jail, and rebuildingRead More »
One accountant’s journey through fraud, jail, and rebuilding Read More »
You recall that your audit opinions will be completely revised starting with December 31, 2012 financial statements. The opinion is completely different.
I’ve discussed that here and here with sample reports.
After you draft your reports with the practice tools used by your firm, it would be wise to double-check them. What to use?
Check out Charles Hall’s article – The Clarity Project – Vetting Your Clarity Opinions with the AICPA Peer Review Checklist.
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Double check your revised audit opinions with the AICPA Peer Review checklistRead More »
Double check your revised audit opinions with the AICPA Peer Review checklist Read More »