Moody’s and other credit ratings agencies were strongly criticised over the role they played in the credit crunch, as their methods saw them rate risky CDOs as safe, at current market value
Accountancy Age, 06 Mar 2008
Global credit ratings agency, Moody’s Corporation, has dismissed its auditors PricewaterhouseCoopers, in favour of KPMG.
Papers filed with the Securities and Exchange Commission last week show that the agency’s audit committee and board of directors were in favour of dropping PwC as the independent auditors.
Moody’s and other credit ratings agencies were strongly criticised over the role they played in the credit crunch, as their methods saw them price risky CDOs at current market value.
As the market for sub-prime mortgages dropped, the criticism increased and the agencies changed their formulas so as to focus on where prices were headed, instead of current market value.
According to the papers filed, PwC’s auditing of financial statements for the years ended December 31, 2006/7 did not contain an adverse opinion or disclaimer, and was not qualified or modified with regards to uncertainty, audit scope or accounting principles.
The agency - which provides credit ratings and research covering debt instruments and securities, with a reported revenue of $2.3 billion in 2007 – maintained it had no disagreements with PwC.
Moody’s decision to select KPMG resulted from ‘a competitive process conducted by the Company in the ordinary course of business’, the papers say.
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