Ex Saturn dealer suing Deloitte....................

[12,000 RPM]

http://www.autonews.com/article/20150608/LEGALFILE/306089974/saturn-was-a-loser-for-years-but-who-knew

Too long to copy but it's an interesting read. Basically dude is saying Deloitte's shitty auditing/reporting failed to disclose the blatant problems at Saturn, and he used their report to invest in more Saturn dealerships.... but as the ATS and other GM debacles demonstrate consultants are not infallible.

[SJ_GTI]

Okay this...

...a different kind of lawsuit...

...was a good line. 

[ifcar]

I'll be interested in seeing how this goes. The story is by nature one-sided at this point because one party has made all its filings and the company hasn't filed its defense and isn't speaking on the record yet.

[TBR]

http://www.autonews.com/article/20150608/LEGALFILE/306089974/saturn-was-a-loser-for-years-but-who-knew

Too long to copy but it's an interesting read. Basically dude is saying Deloitte's shitty auditing/reporting failed to disclose the blatant problems at Saturn, and he used their report to invest in more Saturn dealerships.... but as the ATS and other GM debacles demonstrate consultants are not infallible.

Auditors are not the same thing as consultants.

[Galaxy]

Auditors are not the same thing as consultants.

In Deloittes case it can be. One of the criticisms thrown at the firm.

[TBR]

In Deloittes case it can be. One of the criticisms thrown at the firm.

Deloitte (as well as, to a lesser extent, PWC, KPMG, EY, and even non-Big 4 accounting firms) as a firm can be both an auditor and a consultant, but individuals within the firm aren't going to do both. At least that's how it is in the US after Enron and Sox.

[Galaxy]

Deloitte (as well as, to a lesser extent, PWC, KPMG, EY, and even non-Big 4 accounting firms) as a firm can be both an auditor and a consultant, but individuals within the firm aren't going to do both. At least that's how it is in the US after Enron and Sox.

PWC, KPMG, and EY sold their consulting business after Enron. Deloitte did not.

[TBR]

PWC, KPMG, and EY sold their consulting business after Enron. Deloitte did not.

They built them back up. PWC also just bought the 300 partner Booz & Co and moronically renamed it "Strategy&".

Just due to the maturity of the practices, Deloitte (and PWC now with the Booz acquisition) does more strategy and large transformation work, but KPMG and EY definitely do non-accounting work, mostly IT related.

[Laconian]

Strategy&? That contrived marketese name makes me see red.

[Galaxy]

They built them back up.

Hmm, not sure if that is good news.... 

[TBR]

Strategy&? That contrived marketese name makes me see red.

They contractually had to rename it (Booz&Co split from Booz Allen Hamilton), but hard to imagine coming up with something worse. Although, when PWC was going to spin off their consulting practice in the wake of Enron, they were going to name it "Monday". Instead, thankfully, IBM bought it.

[TBR]

Hmm, not sure if that is good news.... 

Good news for Big 4 partners. Not sure it's good news broadly though.

Although I would think there could be sufficient controls in place to limit the risk. My understanding is that, in the Big 4, partners pretty much have their own P&L so as long as there isn't direct sharing of revenue between audit and advisory partners there shouldn't be conflicts. There are also limits to the type of advisory work they can do for audit clients. For example, I interned in KPMG's advisory business, and my client for the summer was not an audit client.

[Xer0]

I'm not sure I get exactly what they are suing over.  An unqualified opinion doesn't exactly mean that the firm is doing well, it just means that the financial statements are presented fairly and accurately.  Was going concern ever mentioned?  Besides that, Saturn was part of a larger GM audit I'm sure and presented as a segment of GM as a whole.  Depending on how large of a segment Saturn was, it was probably bunched together with other parts of the company.  Without actually looking at the 10K and the disclosures, I think this might be a little overblown.

[Soup DeVille]

If the auditor claimed the reports were accurate when they were not...

Still,
It seems unlikely in the post Sarbanes-Oxley world.

[TBR]

I'm not sure I get exactly what they are suing over.  An unqualified opinion doesn't exactly mean that the firm is doing well, it just means that the financial statements are presented fairly and accurately.  Was going concern ever mentioned?  Besides that, Saturn was part of a larger GM audit I'm sure and presented as a segment of GM as a whole.  Depending on how large of a segment Saturn was, it was probably bunched together with other parts of the company.  Without actually looking at the 10K and the disclosures, I think this might be a little overblown.

I would be shocked if they were segmented out on the 10k. Maybe would have some blurbs about the business, but I can't imagine having full financials for what had to have been <5% of the company. They were probably just segmented into US vs not.

[Soup DeVille]

There's also the very real possibility that the dealer does not understand the audit, or the specific purpose of it, and is ascribing to it meanings which were never intended.

[Xer0]

I would be shocked if they were segmented out on the 10k. Maybe would have some blurbs about the business, but I can't imagine having full financials for what had to have been <5% of the company. They were probably just segmented into US vs not.

Looking over the 2005 10K, Saturn was mentioned all of 8 times and was part of GMNA.  GM's segments are auto (GMNA being one of them along with 3 more) and financing.  So you're hypothesis was right on.

There's also the very real possibility that the dealer does not understand the audit, or the specific purpose of it, and is ascribing to it meanings which were never intended.

A very real possibility.

[12,000 RPM]

There's also the very real possibility that the dealer does not understand the audit, or the specific purpose of it, and is ascribing to it meanings which were never intended.

I readily acknowledge that possibility. Dealer should have gone to more than one source to make a decision.

[Cookie Monster]

PWC, KPMG, and EY sold their consulting business after Enron. Deloitte did not.

Hey! I work in consulting at EY!

[SJ_GTI]

If the auditor claimed the reports were accurate when they were not...

Still,
It seems unlikely in the post Sarbanes-Oxley world.

If I understood correctly, Saturn Corporation was a wholly owned subsidiary of GMNA. Saturn Corporation itself owned a subsidiary named Saturn Distribution Corporation, which had no employees or physical operations, but apparently did make a profit...somehow (I assume by purchasing cars from Saturn Corporation and then selling those cars to the dealers). In Saturn's franchising solicitations they claimed that Saturn Distribution Corporation was profitable (while noting in the fine print that Saturn Distribution Corporation was a wholly own subsidiary of Saturn Corporation), which appears to have been an intentional "sleight of hand" to give potential franchisee's the impression that the company was doing well, even though it was not.

I auditors signed off on this practice I can see why they might be liable. While there are lots of rules and stuff in USGAAP, at the end of the day the goal of financial reporting is to give current and potential stakeholders of the company an accurate view of the company.

[AutobahnSHO]

I know nothing about finance/companies but I assume it's always a shellgame of trying to make money and hide it or tell people you're making more than you are and/or shifting blame/loss.....

[SJ_GTI]

I know nothing about finance/companies but I assume it's always a shellgame of trying to make money and hide it or tell people you're making more than you are and/or shifting blame/loss.....

Not anywhere I have ever worked.  We try to report as accurately as possible on a timely basis. I have seen some struggling divisions try to hide losses, but you can only do that for a relatively short time (few months to a year) before it becomes obvious to anyone paying attention.

[Cookie Monster]

I know nothing about finance/companies but I assume it's always a shellgame of trying to make money and hide it or tell people you're making more than you are and/or shifting blame/loss.....

lol the PCAOB and other organizations make it their job to make our jobs a living hell in order to ensure that kind of stuff doesn't happen.

[Xer0]

lol the PCAOB and other organizations make it their job to make our jobs a living hell in order to ensure that kind of stuff doesn't happen.

And then you guys make our jobs a living hell to make sure that our shit is in place lol.

[AutobahnSHO]

you can only do that for a relatively short time (few months to a year) before it becomes obvious to anyone paying attention.

So then whoever does the hiding steps in....   

How did Enron go down??

[Cookie Monster]

So then whoever does the hiding steps in....   

How did Enron go down??

Enron was a long time ago. Why do you think Sarbanes-Oxley was passed?

[Cookie Monster]

And then you guys make our jobs a living hell to make sure that our shit is in place lol.

What do you do?

[SJ_GTI]

So then whoever does the hiding steps in....   

How did Enron go down??

The larger and more complicated the company, the longer the Shell game could go on. But Enron is a good example...in that case, the Auditor's did know about it, which is why Arthur Anderson no longer exists.

[Xer0]

What do you do?

Financial reporting. 


Sent from my iPhone using Tapatalk

[AutobahnSHO]

what happens when companies don't get caught? do you guys honestly think they always do?

just asking honest questions.