People litteraly went to the banks in Asia during the extraordinary audit, something that is not usually done during "normal" audits.
And yes, I also hate when I misplace my billions. Especially since I have yet to relocate them...
I think you're joking, but I'm not sure. I work in trading, and I've been on the receiving end of that phone call. As I recall, it was around 9PM in the US, my work phone rang and could see from the caller ID that it was from our London office. There were no greetings, first words I hear were "We're missing over a billion dollars. You need to find it...NOW."
When I received that call, it was in the middle of the 2008 financial crisis. The daily PnL swings were wild, and it wasn't always clear on the cause. FX volatility was insane. We did all of our PNL reporting in USD, but held a lot of foreign assets.
There was no malfeasance; I'd just taken ownership of the system a week or two before, and a nightly job had silently failed. Perl job on Windows, extracting data from a 3rd party trading system that wasn't built w/ integrations in mind, feeding it into in-house systems. It was a very flimsy house of cards. A gentle breeze in the night would knock it over. Rewrote the integration in Python, hooked everything up into our monitored job scheduler. Had to do some janky UI automations in Python until we got the vendor to add a proper CLI-based reporting mechanisms. It was a "fun" ride, but I eventually got my evenings back. Did cause the end of a relationship, though, so there's that.
I can only imagine so the slight shock you had after that phone call so! I love those stories from the trenches so you hear on HN, thanks for sharing!
Seeing as I was hearing about Libor all day, every day (almost all of our clients had their mortgages computed on that piece of info), I had expected it to be something “automatic” (like at least an XML thingie) and well documented. Instead I had to parse some html on a page somewhere (I remember some yellow background) and hope that the HTML structure around that Libor figure would remain unchanged.
This was all happening around 2007 - early 2008, suffice is to say that when all the Libor scandal happened a little later on I was not at all surprised.
It's just survey data, and no verification of whether a loan can happen at that rate? And you throw away the lowest rates, which should be the market-clearing rate all-the-things-being-equal if lenders are fungible? And if lenders aren't fungible, then isn't it all apples and oranges?
Why wasn’t it fixed? Because replacing it would require an enormous amount of coordination and there was no clear evidence that it was broken. When that changed it finally got replaced by SOFR.
It was a club used by the big boys from banks to screw everyone else. With a madeup number that benefitted them.
The LIBOR rate-setting mechanism was a reasonable design for the world of 1986 [1], when finance was a smaller club and trust among bankers was higher. Also, it wasn't clear back then that the volume of contracts referencing LIBOR would grow to become many trillions of dollars just a short couple decades later.
When problems finally became very clear, we replaced it.
[1] One criticism often levied at LIBOR is why it sufficed to take a windsorized bank poll instead of looking at something more reliable, such as market transactions. But that's ahistoric: in 1986, banks didn't always do unsecured 3m lending on a daily basis. And later on, banks mostly stopped doing unsecured lending to one another entirely. So critics who suggest that LIBOR should've looked at market transactions entirely miss that finance, actually practiced, is a constantly moving target and it's hard to predict the future when designing benchmarks. SOFR, LIBOR's replacement, looks at secured interbank lending — a practice that was rare when LIBOR was created.
There are strict rules and guidelines around verifying an asset. The auditor isn't supposed to "believe the documents" - they need to form an independent opinion.^1
If the auditor is unable to obtain sufficient appropriate audit evidence to verify the asset, they can issue a qualified opinion due to a scope limitation.
^1 https://www.accaglobal.com/gb/en/member/discover/cpd-article...
What EY did was ignoring all the warning signs they had: money laundering, making up business, fraud and all that.
EY also wanted the proof the standards it seemingly met, that was the failure. But then those audits are not really meant to find organized fraud at a company to begin with.
It objectively wasn't. I've never heard of a case where the auditor doesn't independently verify the bank account balance with the bank itself. More reliable evidence reduces the need for additional corroborating evidence. In general the evidence obtained from the company itself wouldn't be considered reliable by itself.
https://www.ft.com/content/db9fa3d7-11da-476e-beea-d5ed0ad13...
This wasn't some hard to uncover marvel of accounting fraud using complex financial engineering.
If memory serves well so, it is quite a while I read Dan McCrum's book, Wirecard produced documents from the Asian banks (fake ones, as we now know). Of course, and I couldn't agree more, they should have at least called the banks up. Especially since a German fin-tech start-up, with on-going bad press, claims to hold billions with some Asian banks from business activities directly related to said accussations circulating in the press. EY deserves all the flak it got.
That being said, again, if a company wants to defraud its auditors, they can for surprisingly long periods if they try hard enough.
I think, we basically agree.
https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e...
Didn't they setup a whole fake bank branch? Sufficiently motivated actors can circumvent any preventative measures.
Occurrences of 'litterally' your comments:
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
Occurrences of 'litteraly' in your comments:
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Usually, I comment on mobile. And if I realized one thing, my orthography takes a very serious hit when typing on a phone, compared to a proper keyboard or handwriting.
I wonder sometimes how much of it is in the training sets for various LLMs by now.