misc. past posts referencing bank modernization act repealing Glass-Steagall ... which contributed significantly to the current problem.
http://www.garlic.com/~lynn/2009c.html#65 is it possible that ALL banks will be nationalized?
http://www.garlic.com/~lynn/2009d.html#28 I need insight on the Stock Market
http://www.garlic.com/~lynn/2009d.html#42 Bernard Madoff Is Jailed After Pleading Guilty -- are there more "Madoff's" out there?
http://www.garlic.com/~lynn/2009d.html#73 Should Glass-Steagall be reinstated?
http://www.garlic.com/~lynn/2009i.html#13 64 Cores -- IBM is showing a prototype already
http://www.garlic.com/~lynn/2009i.html#54 64 Cores -- IBM is showing a prototype already
http://www.garlic.com/~lynn/2009i.html#77 Financial Regulatory Reform - elimination of loophole allowing special purpose institutions outside Bank Holding Company (BHC) oversigh
http://www.garlic.com/~lynn/2009l.html#5 Internal fraud isn't new, but it's news

and when there was talk about oversite of unregulated over-the-counter commodities, the same person (and his wife) were involved in the commodities modernization act ... precluding any oversight ... which resulted in Enron. In the wake of Enron, SOX was passed w/o actually addressing the underlying problem, resulting in AIG.

In earlier part of this decade, I was at conference of european financial executives and pontificated about SOX not being able to do anything about serious fraud activity (and it being the auditor full employment act).

In part what was needed were business processes that would preclude types of things that SOX was trying to catch after the fact.

One of the issues with audit was having independent sources of information and being able to compare for inconsistencies ... say looking at the books of a large number of different entities and verifying that entries for various kinds of transactions on one set of books ... matched entries for the same transactions in other books.

I liked the early ISO 9000 audits ... people were asked if what they were doing was documented and whether or not they had read and understood those documents.

Part of the current circumstances also involved entities being able to carry significant percentage "off-books". There currently is lots of hand-wringing about audit rule changes regarding having to bring all those entries back onto the books ... and the possibility that many current financial entities would then have to be declared insolvent.

Well. My response in the next post!

The Big Four auditors may not be catching errors and frauds at financial companies because they'd like to keep the business. Those firms – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers – are too busy trying to maintain longstanding relationships and selling consulting services to raise their hands about accounting manipulation and illegal activities.

Even a retired Ernst & Young Global Vice Chairman is worried the auditors are losing focus. "I am personally worried about audit firms trying to get you to spend money with them on consulting," Roger Dunbar, now chairman of Silicon Valley Bank, told the audit profession regulator, the Public Company Accounting Oversight Board, at a recent forum on auditor rotation. "It's a risk."

Only two firms audit the four largest U.S. banks. The 20 banking and financial services institutions that pay the highest audit fees, according to Audit Analytics, spent nearly $1 billion with those vendors in 2011. Wells Fargo has worked with KPMG for more than eighty-one years. Citigroup and KPMG have been together since 1969. PwC audits Bank of America and JP Morgan, as well as Goldman Sachs, MF Global, Barclays and PNC. These five engagements accounted for more than $300 million in fees in 2011 not including additional audits of non-consolidated subsidiaries and funds, which double that number.
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