PCAOB Continues Sadistic Treatment of Accounting Firms' Audits: BDO Edition

Earlier we gave you the lowdown on Good Grant Thornton Times courtesy of the PCAOB. As promised, we're back with the OB's inspection report on everyone's favorite Teflon firm, BDO.

According to CFO, BDO's main problems appear to be with documentation and actually doing work, "According to the reports, the shortcomings were usually based on a lack of documentation and persuasive evidence to back up audit opinions."

Translation: Basically BDO may or may not have actually done the work they said they did but didn't bother creating workpapers that show that they actually did the work. The PCAOB is not down with just an auditor's good word.

Some poor audit associate probably spent 36 straight hours of auditing but didn't bother creating the workpaper. And, similar to the GT case, the managers and partners were apparently still cool with it.

There are other situations where the Peek-at-Boobs thought that BDO just decided they weren't going to do the work including "channel stuffing" and misstatements due to possible fraud (not really a problem these days anyway).

BDO took the criticism better than GT though, saying, "an inherent part of our audit practice involves continuous improvement." They figured that they were pushing their luck after dodging the Banco Espirito bullet.

Audit Overseer Faults BDO, Grant Thornton [CFO.com]

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PCAOB Releases Grant Thornton and BDO Seidman Inspection Reports

Light reading for the weekend:

Grant Thornton

BDO

Everyone owes 500 words for each firm by Monday morning. We'll address here at some point. The weekend is getting started early so don't expect it to be today. Sphere: Related Content

Ex-BDO Partner to Might Go Directly to Jail

DealBook:

"Robert Greisman, 58, of Deerfield, Ill., pleaded guilty in United States District Court in Manhattan. He is the fourth tax partner at BDO Seidman, the accounting and consulting firm, to plead guilty in connection with a federal investigation of tax shelters."

Sentencing on Oct. 23.

As you were.

Ex-Partner at Tax Firm Pleads Guilty in Shelter Case [DealBook/NYT] Sphere: Related Content

BDO Int'l Skates, Leaves BDO Seidman to Deal with $520M Verdict

Believe it or not friends, the wedding planner defense worked for BDO International Global Coordination.

As Tramp speculated, the six-person South Florida jury seemed to relate more to "wedding planning" than "public duty" and found that BDO International Global Coordination was not liable for either the punitive damages of $350M or the compensatory damages of $170M.

BDO is certainly a benefactor of the "jury of your peers" in this case considering that the peers have no clue what the hell any of the evidence meant or why it pointed to BDO International Global Coordination's responsibility. Re: The Auditors has excellent coverage including video clips. Go here and here.

During the trial, defense counsel went so far to state that the the claim by the Plaintiff that the firm had a "public duty" was a SIDESHOW. Want to know what comes at the very top of a Google search when you type in "sideshow"? We were hoping for the human blockhead or the bearded woman, but instead it was this.

So now BDO Seidman is on the hook for the $520M. They've said that these damages will bring double entry apocalypse. But they're appealing the original verdict, and why the hell not? They seem to be pretty good at dodging bullets. Oh wait, they're not the same firm. Sorry, sorry, sorry.

PISS OFF.

Jury: BDO International not liable for millions in losses [Miami Herald] Sphere: Related Content

Things Will Turnaround For Us, You'll See...

In case you haven't already noticed, BDO Seidman can't really do anything right.

Not only are they so desperate that they are using the wedding planner defense (oh, wait sorry, that's BDO International, which is completely different and separate from BDO Seidman, totes my fault) against Banco Espirito, now the former Chairman and CEO has been indicted on charges of conspiracy and fraud over his work with tax shelters.

You know, a firm really hasn't had a run like this since Arthur Andersen. Just sayin'.

7 Indicted in Tax Shelter Case [DealBook]
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Scoping - 6.8.09

Banks May Be Allowed To Repay Some TARP Money - "This week, the government reveals which banks will be permitted to give money back." - Don't get your hopes up Citigroup. [NPR]

BDO International: “Manage and Control” Means Slam Dunk For BES - Re: The Auditors thinks BDO is toast. Unless of course, the jury buys the "wedding planner" defense. [Re: The Auditors]

N. Korea Convicts 2 U.S. Journalists - [Washington Post]

Supreme Court asked to delay Chrysler sale - Something about unions getting priority over bondholders. The Obama Administration will certainly put the kibosh on anyone trying to actually follow bankruptcy law. [Reuters] Sphere: Related Content

Tramp After Hours: Banco Espirito v. BDO Round 1

Duped Bank vs. Negligent CPA's. Round 1.

Much like Rocky vs. Drago, the life of BDO (Rocky?) may be on the line. Tramp will act as a ringside judge. Enter the lawyers:

For Banco Espirito, it's fundamentals: "'BDO International was grossly negligent,' said Steven Thomas, an attorney for Banco Espirito Santo. 'They were supposed to make sure their BDO firm here in Miami was doing its job.'''

BDO counsel took a different approach: '''Confusion creeps in because of the similarity in names,' Mark Raymond, a lawyer for Belgium-based BDO International, told jurors."

He continues: '''Like a wedding planner, they coordinate, they facilitate,' Raymond said. 'Does a bride give the wedding planner all of these rights to run and control everything? Of course not.'"

Round goes to: BDO - We are talking about a south Florida jury here. Most of the jurors are probably old with Medicare-funded hearing aids so confusion is a given.

Plus, all the fundamentalist Christians and religious Jews down there do love themselves some weddings and they all know that the wedding coordinator is NOT in charge.

The other poss is that jurors are alcoholics/addicts too fucked up to pay attention because they lost their ass on the beachside condos.

Hypothetical exchange during jury selection:

Potential Juror (on cell phone in slurring speech): You promised me they would sell! You fucking promised me!

Judge: Ahem!

Potential Juror: Excuse me? Oh, sorry. No, I don't have any idea what a global network of accounting firms is.

Defense Counsel: I have no problem with this juror, your honor.

Well played counselor. Updates will continue.

Banco Espirito Santo wants firm held liable for jury verdict [Miami Herald] Sphere: Related Content

In this Corner...BDO Seidman

It's more like a welterweight match but anyhoo...Opening statements were scheduled to be given in Banco Espirito v. BDO International in Miami today.

For those needing a refresher, BDO has been ordered to pay $521M to Banco Espirito after the Portuguese bank got duped out of $170M by the factoring (sketchy loans) company E.S. Bankest. New York Times coverage here and re: The Auditors here.

A jury found BDO guilty of negligence, and the firm was ordered to pay compensatory damages of $170M and $351M in punitive. The awards could potentially put BDO out on its ass.

The issue in this case is to decide if the "local" firm was acting as an agent of the international firm. If so found, the entire international network of BDO firms may be found liable for the judgment found against BDO.

Ouch.

This has big implications for all international firms, most currently for PwC who might find itself in a similar sitch with Satyam

Stay tuned.

Fla. jury to decide if BDO International liable [WEAR ABC 3] Sphere: Related Content