U.S. Accounting Irregularities Not Exception to the Rule

In my earlier post, "Bad C's," I highlighted a few reports that lent further weight to the notion that the financial sector has not been a paragon of virtue, to put it mildly. Yet while many banks and brokers have engaged in some pretty bad behavior -- which, among other things, helped bring about the worst financial crisis this century --they are apparently not the exceptions to the rule, as a jr. deputy accountant reveals in "Accounting 'Irregularities' on the Rise in the Recession":

Reuters is reporting accounting fudging and fraud are on the rise in the US as a result of "pressures" for companies to perform despite the hostile economic environment.

Sure, there's that and then there are also the auditors but we'll leave them be for now, it's Sunday and we're feeling nice.

Reuters:

Corporate balance sheets may be showing signs of the wear and tear from the prolonged U.S. recession as accounting irregularities are starting to surface at growing numbers of U.S. companies.

"When things get difficult companies tend to stretch even further and utilize whatever games that they can get away with and sometimes they don't get away with them," David Tice, chief portfolio strategist for bear markets at Federated Investors, said in an interview with Reuters television on Wednesday.

Accounting irregularities are increasingly showing up in U.S. regulatory filings and corporate announcements.

Fraud in non-financial sectors? Say it ain't so. Well why should auditors and management be committed to truthful accounting if the example set by our powers that be is to deny, deny, deny?

Professor of Economics and Law at the University of Missouri and senior regulator during the S&L crisis of the 1980s, William Black blamed "a massive fraud" for the economic crisis on Bill Moyers earlier this year:

[They] don't want to change the bankers, because if we do, if we put honest people in, who didn't cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up....

Geithner is ... covering up. Just like Paulson did before him....

These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed....

Move along now, nothing to see on these cash flows.

Comments

[morph366:]

Don't worry - once we've got this nasty recession thing behind us no one will remember that we fudged the numbers - will they?

Nov 01 02:40 PM

[cowlady:]

Rotten inside and out. The only ingestible fare are those companies that are doing real business and creating what people really need. The problem is that we just can't wrap our minds around the idea of an economy that isn't growing in leaps in bounds. In the realm of physiology, that's cancer. Can't we find a model that can accept stasis punctuated with natural cycles of modest growth and contraction? That's not capitalism, is it!

Nov 01 03:18 PM

[Andrew Butter:]

Good call and good article, thank you for tagging this.

You are right, the whole thing is a fraud, the ratings were fraudulent, the valuations of assets on the books of banks are fraudulent, and that fraud is trickling down.

Nov 02 02:07 AM