Weekend August 27, 2016
Last Tuesday we reported that PwC was being sued for $5.5 B over the failure of Taylor Bean and Whitaker Mortage. PwC performed the audit and the firm
later failed. PwC has now settled the lawsuit.
As always in such deals the terms are not revealed but it was 'to the mutual satisfaction of the parties.' Interestingly PwC did ot audit Taylor but audited Colonial Bank which purchased mortgages from Taylor. The bankruptcy trustee for Taylor claimed PwC should have uncovered the fraud. Both Taylor and Colonial went bankrupt in 2009.
This certainly expands the concept of external auditor liability.
Curious I googled further and found a complete story of how the fraud occurred.
This is certainly a textbook case of how an overdraft grows to a much larger problem as the fraudsters desperately try to cover the original fraud. This is how forensic accounting works to unravel a fraud.
But then again, large firms are in near continual lawsuits over similar events. It appears the Big Four CPA firms are Too Big to Fail TBTF. What would it take for someone to say, you do not deserve the trust of the public after so many failed audits? Or conversely, just what level of assurance should an audit provide to the public?
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