BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Where Was KPMG, Wells Fargo’s Auditor, While the Funny Business Was Going On?
by Howard Haykin, CPA
As a CPA and a former auditor and internal auditor, I believe that Mr. Green's statements and the article's hypothesis are misguided. Without a doubt, auditors must place significant weight on a company's internal controls in the process of determining whether they can rely on that company's financial statements and issue the opinion that such financial statements are free of material misstatements and are presented fairly in accordance with the Generally Accepted Accounting Principles (GAAP).
If there is confidence in a company's internal controls, auditors can significantly reduce their detailed substantive testing of line items in a company's general ledger. Those line items, in turn, roll up into financial statements. When the process - internal controls - works, there is a higher degree of likelihood that the numbers flowing up into the general ledger and, ultimately into the financial statements, are complete and accurate.
However, if and when testing of internal controls fail - i.e., auditors determine or suspect that a company's internal controls, on a material basis, are either weak or were not carried out as intended - then those auditors have no choice but to ramp up their substantiate tests of specific transactions that make up general ledger accounts and financial statement line items.
UNETHICAL OR ILLEGAL CONDUCT. In the process of conducting an audit, when auditors detect any evidence or indication of unethic or illegal conduct, their first call is to determine whether such 'weaknesses' might have a material impact on the company's financial statements. Presuming that the company's financial statements are not materially affected, it is the responsibility of the auditors to notify company management of such 'weaknesses' and to often suggestions as to corrective action. These observations are provided in a "Letter of Recommendations."
It is then up to company management to address the auditors' findings and to respond with corrective action plans, as warranted. If company management is of the opinion - or determines - that the 'weaknesses' are not significant or are "one-off" or "isolated" occurrences, the matter may be summarily handled or disregarded. In other words, the auditors have fulfilled their responsibility. Period. End of story.
That apparently is the essence of what Wells Fargo's auditors, KPMG, related in a letter dated 11/28/16 to U.S. Senators Warren, Hirono, Sanders and Markey.
KPMG wrote it did become aware, as early as 2013, of “instances of unethical and illegal conduct by Wells Fargo employees, including incidents involving these improper sales practices.” But the firm said it was “satisfied that the appropriate members of management were fully informed with respect to such conduct.”
Instead, KPMG told the senators, its view is that “not every illegal act has a meaningful impact on a company’s financial statements or its system of internal controls over financial reporting. From the facts developed to date, including those set out in the CFPB settlement, the misconduct described did not implicate any key control over financial reporting and the amounts reportedly involved did not significantly impact the bank’s financial statements.”
I respectfully welcome comments and differences of opinion.