accounting - Mahony Partners

May

2012

Disclosure is an Attitude

Financial Services, Taking & Managing Risk

I recently had lunch with a senior executive from a big accounting firm who complained about the criticism his firm was facing over audits it conducted at big companies that later were found to have big problems. In all these cases, the executive said, there was a “well established body of accounting practice” that permitted the company to forestall disclosure or keep certain items off the balance sheet or bury an important fact in a fine-print footnote. As it turned out, the things these companies obscured were pretty important to investors. Once the off-balance-sheet liabilities were known, the company’s valuation tumbled, executives were fired and lawsuits and recriminations ensued ... Read More

Jan

2012

Communicating European debt risk

Financial Services, Taking & Managing Risk

As reported today, the US Securities and Exchange Commission has introduced guidance for financial firms related to reporting of their European debt exposure. The SEC issued its recommendations to address the inconsistent approach firms have used to disclose their risk to sovereign and private borrowers: "In response to our comments on their disclosure documents, registrants have provided incremental improvements in disclosures of exposures to so... Read More

Jan

2012

More on Refco and MF Glboal

Crisis, Financial Services

Years after its collapse, Refco continues to make news. Yesterday, an appeals court overturned the conviction of an attorney, Joseph P. Collins, who had been the chief outside counsel for the futures brokerage and was found guilty of aiding the company's scheme to hide millions in debt and mask its true financial condition. When the fraud was discovered, Refco filed for bankruptcy, and its assets later were sold to Man group, which later spun them off as MF Global. Collins was convicted largely on the basis of testimony from a former Refco executive who cooperated with fe... Read More

Dec

2011

The Irony of MF Global: The System Worked

Crisis, Financial Services, Taking & Managing Risk

Were it not for the missing customer funds, the collapse of MF Global would be hailed as an example of how well the financial system worked. That’s a very big “if,” of course, and the loss of customer funds is a scandal all its own. But the market worked - and that's an important lesson. The accountants, the regulators and the board of directors did their part - not perfectly and perhaps not quickly – but they asked the right questions, demanded disclosure of the firm’s trades and forced management to defend its strategy. Customers, shareholders and counterparties then concluded MF Global had too much risk and abandoned the firm – exactly the sort of rough justice that’s at the core c... Read More

Dec

2011

Refco’s ghost haunts MF Global

Financial Services

It’s impossible to read about the demise of MF Global and not think about Refco, the futures brokerage that collapsed in scandal in 2005 and whose remains were later bought by MF Global. Like Marley’s ghost, the weaknesses that played a part in Refco’s downfall returned to haunt MF Global. Refco’s problems came to light just a few months after it completed an initial public offering in August 2005 that valued the company at $3.5 billion. A short time later, the firm discovered that CEO Phillip Bennett had maintained control of a separate entity that wasn’t consolidated with Refco’s books and held $430 million in Refco debt. When Refco disclosed the debt in October 2005, just eight w... Read More

Oct

2011

Crisis continues for Olympus

Taking & Managing Risk

The crisis at Olympus shows no sign of easing after the resignation of Chairman Tsuyoshi Kikukawa. Japanese regulators have joined investors in calling for a full explanation of payments Olympus made in connection with acquisitions it made in recent years. His resignation will not remove Kikukawa from the company, however. He remains a director on the board, a situation that critics say could allow him to continue to influence a board he’s managed very closely for year... Read More

Oct

2011

Olympus: Where were the auditors?

Taking & Managing Risk

The hole is getting deeper for Olympus and its chairman, Tsuyoshi Kikukawa. And his outside auditor, Ernst & Young, might find itself alongside him. A day after denying allegations by its former CEO, Michael Woodford, that it paid advisory fees of $687 million on a $2 billion acquisition, the company reversed itself and acknowledged that Woodward’s figures were correct. Analysts have downgraded the shares, and Goldman Sachs suspended its rating over doubts about the company’s accounting, calling into question the accuracy of Olympus’s books over the past several years. It hasn’t helped that three different company officials are speaking on the matter - Chairman Kikukawa, Executive ... Read More