US audit watchdog warns about "unusual transactions"
Auditors told to be on their guard
The US audit watchdog has warned about “significant unusual transactions” in
its latest update to US accounting firms.
The update, from the Public Company Accounting Oversight Board (PCAOB), comes
in the wake of accusations US bank Lehman Brothers used repurchase transactions
to hide bad debts from its balance sheet.
The update is designed highlight “new, emerging, or otherwise noteworthy
circumstances”.
Lehman allegedly manipulated a techincal definition of a sale to temporarily
displace its liabilities, which resulted in billions of pounds being removed
from its balance sheet in the years leading up to its collapse, according to a
report by United States Bankruptcy Court, examiner Anton Valukas.
Lehman Brothers auditor, Ernst & Young, has stood by its audit of the
company following the accusations.
The PCAOB does not refer to Lehman’s practices, but said the update was to
“remind auditors of public companies about their responsibilities to assess and
respond to the risk of material misstatement of the financial statements due to
error or fraud posed by significant unusual transactions”.
In the statement, Martin Baumann, chief auditor at the PCAOB said his message
to auditors “has consistently emphasized attention to audit risk and adherence
to existing audit requirements”.
Read the PCAOB statement:
PCAOB
ISSUES STAFF AUDIT PRACTICE ALERT ON AUDITOR CONSIDERATIONS OF SIGNIFICANT
UNUSUAL TRANSACTIONS
Further reading:
Lehman
smoking gun leaves E&Y facing questions – Accountancy Age
