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28 Sep 2011
DELOITTE US HAS BEEN SUED for billions of dollars for allegedly failing to detect fraud during its audit work at collapsed US mortgage firm.
A trust managing the bankruptcy of Taylor, Bean & Whitaker Mortgage Corp (TBW) has filed a claim for a combined $7.6bn (£4.9bn), reported Reuters.
Further reading
Deloitte had certified the mortgage business as viable with accurate financial statements between 2001 and 2008, which was false, claimed the trustee Neil Luria of Navigant.
Former TBW chairman Lee Farkas was sentenced to 30 years in prison for fraud. He had been accused of covering up large losses at the mortgage company by moving funds between accounts.
The Big Four firm said the claims were "utterly without merit".
"The plaintiffs in these cases, Taylor Bean & Whitaker and Ocala Funding, were the wholly-owned private companies through which convicted felon Lee Farkas and his co-conspirators committed their crimes. The bizarre notion that his engines of theft are entitled to complain of injury from their own crimes and to sue the outside auditors they lied to defies common sense, not to mention the law. These claims are utterly without merit."
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Visitor comments Add your comment
Mixed opinion
YES-they should be sued, 6 years is a long time to detect fraud,given the sircumstances i think they had a part to play in it. what happened to auditor rotation?
NO- just because auditors should have professional scepticism does not make us the police,just because they failed to detect it does not mean they should go down the same way TB W did.
Posted by: Kelebonye Masupologo (Botswana), 29 Sep 2011 | 08:11
Looking at the real issues
Before we can make specific comments on whether there was negligence and lack of due diligence we would have to look at the auditor's reports and recommendations given to the company over the periods.
Deloitte is a company that is know for its comprehensive auditing techniques, therefore it is unlikely that they would not have seen the danger coming.
if they have made the necessary recommendation and management refuse to adhere then after a couple of attempts they should have withdrawn their service. If they were entice by the lucrativeness of the fees and fail to be professional then they should be held responsible to some extent.
On the other hand we have to be mindful the collusion is on of those frauds that auditors find very difficult to detect in the search for evidence.
Posted by: Leroy Blake, 30 Sep 2011 | 15:35