Professor Elam

At least three items are in the DMN this Sunday 4/1/2007 concerning accounting and or tax issues. 

You will recall that Arthur Andersen collapsed in the wake of its failed audit of Enron. Since then KPMG has paid the biggest fine ever (about $450M and not tax deductible) to the IRS for promoting alleged fraudulent tax shelters. Now what was the largest and one of the three most prestigious (Fulbright Crooker, Baker Botts)  law firms, Jenkins and Gilchrist has collapsed over KPMG like involvement. Click now or buy the paper I am sure this link won’t be up long.  But their Chicago office earned some $297 M over  a few year period by issuing ‘more likely than not’ letters assuring the validity of currency swap tax shelter schemes.  Whoops, now the firm is gone after lawsuits by plaintiffs extracted over $80 M from their liability insurers and more millions from the firm.  I will explain the details in class but this really is a must read.

Meanwhile right here in Lancaster ISD, the annual report from the School District to the Texas Education Agency is past due. And the long time CFO has quit in January and has no comment.  The article says the books don’t balance and the external auditors are trying to fix that.  Strange, modern computer accounting programs won’t let one make an out of balance entry, and the format for TEA reporting is very specific.  Lancaster ISD voters just rejected a  $215 M bond issue.  There is a $142 M bond issue on the May ballot.  The article suspects that late reporting may affect the bond rating and interest rate. Do you think it will cause  a confidence crisis among voters-I know it has for me!

Finally there is a good article about forensic auditing and accounting at Grant Thornton. in the business section, a Cheryl Hall column.  Seems accountants readily admit to their thievery if you just tell them they took more than they did-hey you stole $5 M, no I didn’t it was only $4.8 M. Gee….