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John McManus asks what the taxpayer got from bank audits


He3

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..the big professional firms have managed to weather the crisis without any external – or, it would seem, internal – questioning as to whether the way they go about business means they must shoulder some responsibility for what happened. It’s a can of worms that nobody wants to open. - John McManus.

McManus is one of a number of very good journalists writing on the abject failure of governance that is costing us so dearly.

His latest is on the charmed life of a small number of professional service firms who seem to ride on regardless.

IF YOU raise the issue of the dominance of the “big four” accountancy firms – or indeed the “big five” Dublin law firms – with businesspeople it will be greeted with a knowing look, a shrug of the shoulders, eye-rolling or a combination of all three. This is often followed by a reference to Chinese walls, implying that the person you are talking to thinks their existence is slightly less probable than that of the tooth fairy.

But there are rumblings from Brussels that may just stir the pot:

It would appear that the big professional firms have managed to weather the crisis without any external – or, it would seem, internal – questioning as to whether the way they go about business means they must shoulder some responsibility for what happened. It’s a can of worms that nobody wants to open. Nobody, apart from the European Commission, which once again looks like forcing us to face up to things we would rather brush under the carpet.

Last week, the internal markets commissioner Michel Barnier published a Green Paper called Audit Policy: Lessons from the Crisis . It is based on the premise that there is probably something wrong with a system in which banks across Europe got clean audit reports one year, only to collapse under massive unseen losses the next.

It’s a simple premise, but not one that very many seem keen to accept in this corner of Europe.


The pot sure could do with some stirring. As McManus reminds us -

According to the Auditor Comptroller General, PricewaterhouseCoopers – the auditor of Bank of Ireland and Quinn Insurance – has received €5.5 million in fees for services rendered to the Government as it grappled with the banking crisis. This, no doubt, includes the 2008 PwC report saying the banks were all adequately capitalised. KPMG (auditor to AIB and Irish Nationwide) got €2 million while Ernst and Young (the former Anglo Irish Bank auditor) got €240,000. Deloitte, the last of the big four and current Anglo Irish auditor got €420,000.

When it decides to put work out to tender, government likes to include a stipulation that a firm must have done similar work for it previously. It is hard to think of a better way to perpetuate an effective 'closed shop'. Closed shops are bad news.

It is hard to see what the taxpayer got out of statutory bank audits - The Irish Times - Mon, Oct 18, 2010
 
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He3

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Bump
 
G

Gimpanzee

Its just so freakin murky that it is hard to know what needs to be done, at least to a complete outsider. But then again, it almost certainly needs an outsider to come in and shake it up.
 

Barnacle

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Its definitely a closed shop on a gravy train. These auditors audited the bank and were well paid for doing so. Their audits are questionable to say the least. Then they were paid by the Government for advise on the crisis which was created by these firms. PWC received €5.5m, that is 11,000 man hours at €500 per hour. Would be nice to see a complete breakdown of their bill especially because these firms already had the information.
 

He3

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Its definitely a closed shop on a gravy train. These auditors audited the bank and were well paid for doing so. Their audits are questionable to say the least. Then they were paid by the Government for advise on the crisis which was created by these firms. PWC received €5.5m, that is 11,000 man hours at €500 per hour. Would be nice to see a complete breakdown of their bill especially because these firms already had the information.
PricewaterhouseCoopers (PwC) estimated on Sunday, September 28th that Anglo, Irish Nationwide and Irish Life Permanent (ILP) could have about €5 billion in bad debts under a “stressed case”, but an accelerated run-off of their loan books would give rise to “significantly higher levels of provisions”. This sum has since reached €40 billion – almost all due to Anglo and Nationwide.

Dramatic bank-crisis scramble revealed - The Irish Times - Wed, Oct 20, 2010

As the story unfolds, we see many examples along similar lines, where now the 'advisers' are quick to point out that they were operating on the basis of information available to them at the time. Lenihan has that script off by heart too.

Did these advisers actually 'advise' in any meaningful sense of the word, or did they simply pass on what they were told by the management of the banks in question and tack on an invoice with loads of zeroes?
 

Barnacle

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As the story unfolds, we see many examples along similar lines, where now the 'advisers' are quick to point out that they were operating on the basis of information available to them at the time. Lenihan has that script off by heart too.

Did these advisers actually 'advise' in any meaningful sense of the word, or did they simply pass on what they were told by the management of the banks in question and tack on an invoice with loads of zeroes?
Yeah, you have to laugh at that one, operating on the basis of information available to them at the time - they were the bl***y auditors of these institutions over the years, they had all the information at their fingertips.

The letter from Fingleton refered to in the article (assuming that he did not write two) was written following a meeting with David Doyle on the 18th September. His letter was written to ensure "you did not leave yesterday with the impression that we envisaged any serious problem with our book on an ongoing basis." He also said that the society has a "strong capital position" and "a realistic provision (for future loan losses) was between €60m and €100m" and that the society was "a very profitable and viable institution".

In terms of size, the bailout for Nationwide is far greater than Anglo.

Sorry, can't provide link, the article was in the Business section of the Sunday Times.
 

Oldira1

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Unless PWC and Ernest & Young are bankrupted for negligence then justice will not have been done. They are at best grossly negligent and at worst....well you know. These firms are evil parasites of the highest order. E Y got €1.4 million for their audit which is 2,800 man hours at €500 an hour and my 2 year old would do better
 

the_rebubblican

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Another example of a vested interest group quietly riding out the economic storm on the back of taxpayers and limp, incompetent government. Time to show the big 4 and 5 the door...
 

Barnacle

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According to Vincent Browne tonight, Meryl Lynch was paid €4m for 4 days work and only three people involved. So if they did not sleep, each person earned €13,888 per hour. Nice work if you can get it!:evil:
 

ocoonassa

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When it decides to put work out to tender, government likes to include a stipulation that a firm must have done similar work for it previously
It's comedy genius. How can I get to find out the name of the person who first introduced this way of doing things? How long has it been going on? Is local government the same? This competition killing buzz alone could be costing us a fortune.
 
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