A rant about accountants
Here's a rather telling comment about Merrill Lynch's choice of a new chief executive:
So, what's happened to the auditing profession? Shouldn't the independent public accountants be on top of this when they audit Merrill's SEC filings?
Oh yeah. I forgot who pays the "independent" public accountants.
Frankly, I can't recall any time in my life when you could put less reliance on the veracity of the public financial statements of our major firms. Accounting gimmicks, tricks, smoke and mirrors, and outright fraud are the norm, not the exception, these days. Earnings can't be counted on as earnings because next year they'll be written off as "non-recurring" losses. And, next year's earnings will be written off as a non-recurring loss the following year. Inventories are almost always carried on the books at values far in excess of their market value even though they are supposed to be carried at the "lower of cost or market value." In many cases, the physical inventories are decades old and unusable, in other words, worthless, even though they are carried at substantial value.
Unfortunately, this means that investors are flying blind.
And, now we learn (if we didn't know it before) that even the investment bank many rely on for investment analysis and advice is hiding crap on its balance sheet to fool investors.
Merrill's [MER 57.92-0.06 (-0.1%)
] selection of Thain was a surprise because the firm had recently indicated to BlackRock CEO Larry Fink that the job was his if he wanted it. CNBC has learned that Fink said he would take the job but only if Merrill did a full accounting of its subprime exposure. At that point, Merrill, which owns 49% of BlackRock [BLK 196.22
0.02 (+0.01%)
So, what's happened to the auditing profession? Shouldn't the independent public accountants be on top of this when they audit Merrill's SEC filings?
Oh yeah. I forgot who pays the "independent" public accountants.
Frankly, I can't recall any time in my life when you could put less reliance on the veracity of the public financial statements of our major firms. Accounting gimmicks, tricks, smoke and mirrors, and outright fraud are the norm, not the exception, these days. Earnings can't be counted on as earnings because next year they'll be written off as "non-recurring" losses. And, next year's earnings will be written off as a non-recurring loss the following year. Inventories are almost always carried on the books at values far in excess of their market value even though they are supposed to be carried at the "lower of cost or market value." In many cases, the physical inventories are decades old and unusable, in other words, worthless, even though they are carried at substantial value.
Unfortunately, this means that investors are flying blind.
And, now we learn (if we didn't know it before) that even the investment bank many rely on for investment analysis and advice is hiding crap on its balance sheet to fool investors.
posted by walldon | 12:04 PM
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