Thursday, January 1, 2009
CPA Triple Header
"At a banquet here [Copenhagen] late last month, accounting firm Ernst & Young [E&Y] feted a Danish Software company for runaway growth under Stein Bagger, its dynamic chief executive. ... But Mr. Bagger, the night's big winner, wasn't there to pick up the accolade of 'Entrepreneur of the Year' and two other awards. ... In the meantime, his award-winning company, IT Factory [ITF], declared bankruptcy. A liquidator has taken over [ITF] and is sifting through its affairs. ... KPMG audited [ITF's] accounts from 2005 through 2007. Deloitte did the same in the previous two years. ... KPMG in Denmark says it is 'shocked' and 'cooperating with police.' Deloitte's Danish unit said it has double-checked its 2003 and 2004 audits and found no problems. [E&Y] for its part, has now withdrawn the three awards it gave to [ITF] on the day Mr. Bagger took flight. 'We feel deceived,' said Soren Strom, head of [E&Y's] 'Entrepreneur of the Year' program, in a statement. The accounting firm, he added, is 'unable to understand the last few days' developments.' ... [Asger] Jensby [ITF's chairman] now says he was wrong and estimates that 95% of [ITF's] reported business was fictitious. ... One person to come out of the mess looking good is Dorte Toft, a 64-year old free-lance journalist and blogger. ... In December, she wrote a blog challenging Mr. Bagger's extraordinary growth figures. But, she says, virtually no one wanted to listen to 'an old woman'," Andrew Higgins at the WSJ, 17 December 2008.
In 2001, Texas CPA named a "Corporate Finance Department of the Year". The company: Enron. Really. This story is so good, a big 87654 firm triple-header. What do these guys know? ITF sounds like Barry Minkow's ZZZZ Best in 1987. What did these CPAs look at? How did PriceWaterhouse avoid involvment with ITF? KPMG is "shocked". Is KPMG Casablanca's Captain Renault? Laugh!