Attention Accountants: You are on the hook for what CEOs/CFOs do if their aggressive accounting tactics bring the firm down and you certified their books.
That seems to be the latest twist in the Lehman Brothers saga. From Repo 105s to false loans made to themselves, the green visor crowd are catching heat. By helping to obscure the true financial condition of a publicly traded firm, you as the auditor, are likely to get hauled into court.
Here’s the WSJ:
Federal investigators have grown increasingly doubtful they can prove Lehman executives violated the law by using an accounting maneuver known as Repo 105, which obscured the amount of risk Lehman held, making the firm’s finances look better than they were, The Wall Street Journal has reported.
But Ernst & Young, Lehman’s auditor, is fighting fraud charges filed in December by the New York attorney general for, among other things, allegedly failing to adequately follow up on a whistleblower’s claim that Lehman was misstating the value and size of its assets.”
We seem to be slowly reversing the 1995 Private Securities Litigation Reform Act, which allowed accountants of public companies to escape fraud charges when they certified make-believe finances . . .
Blame the Accountants — and Deregulation (December 2010)
Lehman Auditor May Bear The Brunt
WSJ, MARCH 14, 2011