PwC sloppiness 55 billion euros error

Eurozone

(Reuters) – The German government tried to deflect responsibility on Monday for a 55-billion euro accounting blunder that has exposed it to charges of ridicule for being inept and hypocritical after its steady criticism of Greek bookkeeping practices.

Finance Minister Wolfgang Schaeuble has summoned executives from the nationalized mortgage bank Hypo Real Estate (HRE) to explain how they made a simple accounting error that ended up raising Germany‘s total debt load by 55 billion euros.

Schaeuble, in the awkward situation of being humiliated by the windfall that will cut Germany’s debt levels, will also demand answers at a Wednesday meeting from the PwC accountancy firm that signed off on the report.

Schaeuble’s spokesman Martin Kotthaus tried to deflect any blame, saying the ministry received a certified statement from auditors that the balance sheets had been checked and approved. He said it was too early to tell exactly who messed up.

“It’s annoying, to put it diplomatically, when corrections of this dimension are necessary,” said Kotthaus, who was grilled at a news conference. “We had a certified audit of the annual accounts for 2010 and it said everything was in order.”

Kotthaus said the bank itself was responsible for its annual report.

The German media nevertheless mocked Schaeuble, saying the 55-billion euro accounting error put Berlin in the same category as the Greek government for failing to report accurate figures. Inaccurate reporting of Greek deficits contributed to the euro zone sovereign debt crisis that has hit Europe hard.

“Incredible but true,” wrote the Rheinische Post newspaper. “The nationalized bank HRE made a staggering 55-billion euro miscalculation. It’s scandalous that bank managers, certified public accountants and government supervisors made an error of this dimension. This kind of sloppiness reminds us of Greece.

via Germany mocked for 55-billion euro bank accounts error | Reuters

55.5 billion euro accounting error

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The discovery and deletion of a 55.5 billion euro ($A74 billion) accounting error at a troubled bank under government protection should ease Germany‘s debt levels, the Finance Ministry reports.

German media were agog at the discovery, caused by a double booking of debt held by FMS Wertmanagement, the so-called “bad bank” created from the insolvent parts of HRE bank, which was nationalised in 2009.

Freeing up the cash means that German debt, as a percentage of gross domestic product (GDP), should slide from 83.7 per cent to 81.1 per cent, said the ministry on Saturday.

The ministry said the problem was caused, essentially, when staff subtracted funds when they should have added them.

via 55.5 billion euro accounting error

China’s accounting problem

KPMG offices in Leeds, West Yorkshire, UK. May...

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The Big Four — PwC, Deloitte & Touche, KPMG and Ernst & Youngaudit the books of most of the world’s largest corporations through networks of legally separate audit firms. Their Chinese arms, which also audit Chinese operations of large multinational companies, have also been beyond the reach of PCAOB inspections.

via Analysis: Painful choices loom on China’s accounting problem

Business welcomes audit exemption plan

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Ministers will on Thursday unveil plans to save more than 100,000 businesses at least £600m a year in accountancy and administration costs by relaxing the requirement to conduct a financial audit.

The Department for Business, Innovation and Skills will launch a consultation on proposals to allow more small companies and subsidiaries to decide for themselves whether or not to have an audit.

Business groups welcomed the move, but warned ministers needed to deliver such steps regularly for companies to gain confidence in the government’s deregulation drive.

At present, European Union rules mean that to classify as “small” for accounting purposes, a company must comply with two out of three criteria: having no more than 50 employees, a balance sheet of no more than £3.26m and turnover of no more than £6.5m.

However, to obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria. Under the new proposals, UK SMEs would be eligible for audit exemption by meeting any two of the three criteria, saving an estimated £206m a year. An average audit for a small company costs £9,500.

via Business welcomes audit exemption plan