naked capitalism

recognized troll says:

”
World Bank in $400 Million Hedging Program for Agriculture”
”
~~Usha Abramovitz~

Was the World’s first financial swap a swap between World Bank and IBM? Look it up! Read it and weep.

anon48 says:

All kidding aside- this is a clear case of the pot(KPMG) calling the kettle black- e.g. Lehman’s Repo 105 adventure, the tax shelter fraud, American Century, etc.

The KPMG report goes on to blame companies because of when “…they contribute to fraud when failing to detect or respond to lapses or gaps in controls…”

Auditing standard AU 150-02 Requires that an auditor gain an understanding of the entity and its environment. This process helps establish a framework within which the auditors assesses the risk of material misstatement and how they plan the audit in response to those risks.

Part of that requires some degree of understanding of external pressures (including regulatory oversight) in assessing those risks. So logic tells me that a potential reduction in the threat of external regulatory enforcement of accounting frauds at client companies as was exemplified during late 90′s(other than in the most egregious of cases), should have caused auditors to increase their level of risk assessment at large client company audits across the board. Higher audit risk = required expanded audit scope and/or auditing procedures. Credible external regulatory oversight and enforcement could be considered a sort of “external control” (my term- not official). So then, any change in the overall level of threat of external control (enforcement) would be inversely proportional to the level of risk that an auditor would have to assess at the front end of his engagement during the planning stage of the audit(and expanded auditing procedures).

Therefore, the lack of credible external enforcement actions against financial reporting frauds that came to light during the millennium, should have caused their subsequent audit risk assessment conclusions to skyrocket across the board. Obviously, that didn’t happen. So with this in mind, how was it that all of the large audit firms were caught back on their heels, when they issued their audit opinions on the large financial institutions during the early years(2002-2005) of the subprime crisis? There’s no other reasonable explanation other than the front line troops were being influenced(pressured) from above.

BTW- if someone responds that complexity was the real cause- don’t believe it. Think of complexity in this context as a euphemism for “camouflaged misrepresentation” . Need more proof- read “ECONNED” It explains what happened during the crisis in easy to understand terms. To me, “complexity” used as a defense in this fashion, means nothing more than the fact that someone just didn’t do their homework.

It would be foolish for an auditor say he didn’t find the fraud because it was too complex. If so, he’d be admitting that he wasn’t competent to conduct the audit(remember he has the responsibility to understand the client entity and its environment). This, in the same way as if I charged someone to work on their car with only my current level of expertise. Now that would be complex!

So, I’ll wrap up by saying that IMO for KPMG to make this kind of broad charge about the failures at other companies to uncover frauds is no better than if Allen Stanford were to stand up in a crowded room, point his crooked finger at Bernie Madoff and scream “Thief! Thief!”.

Valissa says:

STRATFOR is always looking at the larger picture, which is very informative. Other financial influence games going on in Europe behind the scenes…

Russia Eyes Austria’s Banking Empire http://www.stratfor.com/analysis/20110617-russia-eyes-austrias-banking-empire

The two largest state-owned Russian lending banks, VTB and Sberbank, are looking to either acquire or inject capital into several major Austrian banks ahead of Europe’s second round of stress tests in July. The Russian business daily Vedomosti and the Financial Times initially reported on these banks’ intentions on April 15 and May 29, respectively. However, what appears to be a simple financial transaction is in fact a strategic move by Moscow to build economic insight and influence within its periphery.

The opportunities for Russian banks to profit by recapitalizing cash-strapped Western European banks abound in the current dire economic climate, but it is not clear that Austrian banks are the most attractive among these options. However, Austrian banks have traditionally held large amounts of their assets in Central and Eastern European countries; coincidentally these are also the nations that most vociferously oppose a resurgent Russia. The acquisition of Austrian bank shares thus would allow Russia to be privy to financial and economic dealings of Central and Eastern European countries while evading the local reluctance to accept greater Russian influence.

It seems very likely that the Russians got this idea to “invest” in Austrian banks from this crew…

Dimon, Pandit, Blankfein, Ackermann Join Kremlin Advisory Board http://www.bloomberg.com/news/2011-03-10/dimon-pandit-blankfein-ackermann-join-kremlin-advisory-board.html

Various STRATFOR articles in the past 6 months have discussed Russia’s current strategies of deal-making with Germany and France, as well as the diminishing power and importance of NATO. Russia is less and less being perceived as “the enemy” by the European elites. Money lubricates friendships like little else does.

Jim says:

Why are so many personally invested in the integrity of the EuroZone, at all costs? Why is it so difficult for an organization like Stratfor (which recently reported that by 2050 Mexico will be a Top 5 Economic country, despite having had GDP/Capita growth of 0.6% during the last 28 years) to consider that the natural state of Europe is for each nation to be sovereign? I applaud German and Greek citizens for wanting to leave the Eurozone.