Tag Archives: ethics

“Auditors Didn’t Flag”

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Silicon Valley Bank’s third-party auditors did not mention the underlying risk to SVB’s viability in its report, which the group issued two weeks before the bank’s collapse.

When KPMG LLP gave Silicon Valley Bank a clean bill of health just 14 days before the lender collapsed, the Big Four audit firm flagged potential losses on loans as a so-called critical audit matter. But the audit opinion was silent on what actually brought down the bank—its unrealized bond losses and ability to hold them given a reliance on potentially flighty deposits.
“The auditors failed to mention the fire in the basement or the box of dynamite on the first floor, but they did point out the peeling paint on the flower box,” said Erik Gordon, a University of Michigan business professor. “How could they miss the interest-rate risk?”

And this from Martin Baumann, ex-Chief Auditor at the Public Company Accounting Oversight Board and who had a leading role in designing the new measure:

Silicon Valley Bank’s unrealized losses in its bond portfolio appear to “meet every definition of a possible critical audit matter[.]”

A critical audit matter is a tool intended to help investors decode risks and uncertainties buried in financial statements, to make audit opinions actually useful.

Thus, how could the auditors have missed the larger risk? Why did they?

Or did they? Maybe this is a demonstration of the weakness of auditors being paid by the auditees for the audits.

One apparent weakness in the PCAOB’s existing requirements, though, is that banks can hide the risks in their portfolios by (re)characterizing some or all of their bond holdings as “hold to maturity” rather than as marketable and so required to report their (fluctuating) market value. But when the bonds are being held in even partial satisfaction of reserve requirements, maybe those “hold to maturity” bonds still should have their current market value reported to the public. After all, SVB had no intention of selling even its “marketable” long-term bonds. That is, until it began to experience deposit withdrawals at rates it could not fill without selling those long bonds immediately, and so at losses driven by the environment’s rising interest rates.

So—again I ask: why did SVB’s auditors not report that interest rate risk? KPMG may well have a valid reason for its silence on that risk, but it should say what that risk is.

In any event, it would be useful to see the timesheets of those auditors—when I worked as a defense contractor, my timesheets were required to be submitted with 10-minute intervals—so we in the public can know what those auditors were doing instead of their jobs.

A String’s Attached

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President Joe Biden (D) and his DoEd Secretary Miguel Cardona are trying to rewrite the Title IX statute to bar States from categorically ban[ning] transgender students from participating on sports teams consistent with their gender identity.

Never mind that the actual statute, enacted those decades ago, is explicitly designed to give women a fair and reasonably equal opportunity to play sports: if a State school or a local school district has a men’s program, that school or district must fund and provide for a substantially similar program for women.

Now the Biden/Cardona DoEd is proposing a rule that would ignore the sex-based Title IX statute and require biological men be allowed to compete in women’s sports in those schools that get Federal funding.

The proposed rule would establish that policies violate Title IX when they categorically ban transgender students from participating on sports teams consistent with their gender identity just because of who they are[.]

Never mind that a transgender woman is a man by his biology, by his genes, by his XY chromosome pair.

Never mind that a transgender man is a woman by her biology, by her genes, by her XX chromosome pair.

This is the Biden administration’s open war on women.

My advice to the States: don’t take the Federal funds. The strings attached are more like chains.

NPR’s New Label

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Twitter has applied a US state-affiliated media label to National Public Radio‘s Twitter account. Twitter’s label defines such media as

outlets where the state exercises control over editorial content through financial resources, direct or indirect political pressures, and/or control over production and distribution[.]

What interests me, though, aside from the fact that there is a measure of affiliation just from the fact that the Federal government provides some funding to NPR, is the reaction to the label by NPR‘s CEO John Lansing in his statement—which he posted on Twitter:

NPR and our Member stations are supported by millions of listeners who depend on us for the independent, fact-based journalism we provide[.]

This is mostly irrelevant to whether NPR is state-affiliated. Voice of America, for instance, also is state-affiliated, and it provides fact-based journalism to the world—along with a strong measure of state-provided propaganda.

Mostly irrelevant: there’s this claim from NPR‘s Web site [emphasis in the original]:

Federal funding is essential to public radio’s service to the American public and its continuation is critical for both stations and program producers, including NPR.

And yet, just above that claim is this graph delineating NPR‘s funding sources as recently as its2020 fiscal year:

Plainly, NPR‘s support does come primarily from Lansing’s millions of listeners. Only 8%, plus a taste, of his funding comes from the Feds. That level may well be important, but it’s far from essential.

Lansing can’t even keep his stories consistent with each other. Which makes his objection even more irrelevant, both on substance and on the funding question.

Even so, that funding gives the Federal government that measure of influence over NPR‘s editorial decisions. And there’s the Federal government’s empirical use of its power to pressure Facebook’s Meta’s and pre-Trump Twitter’s editorial decisions. State-affiliated is warranted.

Sort of aside: it seems likely to this poor, dumb Texan that those State and local governments listed in the graph above, being much closer to Lansing’s millions of listeners than the Federal government, could well fill any shortfall were the Federal government to reduce or eliminate its funding share. That is, if the listeners resident in any of those more localized jurisdictions agreed that NPR was worth their tax money.

Update: As of 12 April, NPR has decided to no longer actively maintain its flagship @NPR Twitter account or any other official NPR accounts on Twitter over the site’s attaching the state-affiliated media label to its posts.

Buh by, luv ya, mean it. Watch out for that door closing behind you.

False Entries

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DA Alvin Bragg’s indictment accuses the defendant [former President Donald Trump (R)] of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST DEGREE in thirty-four counts.

Thirty-four counts of made and caused a false entry in the business records of an enterprise…, all of them centered on voucher entries into a Detail General Ledger, and check stubs and invoices kept…somewhere.

Thirty-four counts of intent to defraud and intent to commit another crime and aid and conceal the commission thereof…. leading into the sentences claiming those false entries. But nowhere does Bragg say who he thinks was the target of the “defraud,” nor does he say what that “another crime” is. Absent a defraud victim, there is no defrauding. By withholding what that other crime is, Bragg is denying the defendant his opportunity—his right—to answer the charge of that other crime.

False entries. Maybe—maybe—three real counts, but cut apart and expanded in 34 of them.

Withholding what that “another crime,” though, 34 times…. How about: false indictment.

 

Bragg’s charging document, the output of his grand jury, can be read here.

“Ladies” is a Microaggression

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A highly qualified educator was offered a position as Superintendent of Easthampton Schools, in Massachusetts. Then he committed the unpardonable and heinous crime of addressing, in an email, the school board’s Chairwoman Cynthia Kwiecinski and Executive Assistant Suzanne Colby as “Ladies.”

Those ladies promptly rescinded the board’s offer as a result of that courtesy. It seems that simple, courteous salutations of respect are now microaggressions in those…persons’…fetid imaginations.

[The unhired educator Vito] Perrone said Kwiecinski told him that using “ladies” as a greeting was hostile and derogatory and that “the fact that he didn’t know that as an educator was a problem,'” he told the [Daily Hampshire] Gazette, adding that she also reprimanded him for using “ladies” as a microaggression.

Perrone’s reaction:

I was shocked. I grew up in a time when “ladies” and “gentlemen” was a sign of respect. I didn’t intend to insult anyone.

Nor did he insult anyone, or at least anyone worth taking seriously. The only ones insulted here are two folks in authority who spend their energy looking for ways to be offended rather than on ways to better educate the children of Easthampton.

Perrone dodged a bullet when that job offer was rescinded; Kwiecinski and Colby demonstrated very clearly the Precious and wrongly focused environment into which he almost stumbled.