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If PwC can’t work it out then how do they audit?

by Dennis Howlett on September 18, 2008

PwC is sifting through the bones of Lehman Brothers and according to Accountancy Age:

There has been speculation that PwC will have to hire specialists to make sense of the investment bank’s derivatives contracts, but all the initial work, apart from legal advice, is being handled by the firm, it said.

If that’s the case then how the heck do they audit these types of business? Oh yes: mark to market solves all ills – except when it goes catastrophically wrong. As it always does.

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Tagged as: Investment Banks, Lehman Brothers, PricewaterhouseCoopers

  • My thoughts exactly Dennis. The auditors are always ten steps behind, shuffling along with their heads down.

    Have you heard that joke? "What's the difference between an external auditor and an internal auditor? An external auditor looks down at your shoes while talking. An internal auditor looks down at his own shoes. "
  • At least with corporate fraud, individuals can be held accountable for inventing and inflating fantasy wealth and profit.

    Who can hold an entire industry or system to account?

    I am not counting on the accounting profession or the regulators - both culpable.
  • It's only an opinion but government can and should step in. BUT - it needs truly independent advice to get fresh regulation and controls in place that are effective. That's anathema to many but which would you prefer? Chaos or order>
  • One of my friends pointed out the simple fact that the US allowed them to go from a 12:1 leverage ratio to 30:1 and later 40:1 is a pretty straightforward explanation for what the hell went wrong.

    The entire American financial system went wacky and people either ignored it or cashed out if they knew about it.
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