Breaking Up is Hard to Do

What happened to the charges against Deloitte, why the total blank silence?

Here is some interesting reading:

http://www.cbc.ca/cp/business/050629/b062984.html

“Another woman asked when former Nortel executives who are alleged to be responsible for the accounting improprieties would be charged, tried and sent to jail.

Others directed their anger at Nortel’s auditing firm Deloitte & Touche and questioned how they can trust restated audited results released earlier this year.

Retiring chairman Lynton (Red) Wilson replied that the board was confident that the company and its auditing firm had done everything possible with the information they had available.

Wilson told shareholders he regretted the troubles that Nortel has undergone since 2000, when its stock price peaked, but he said the accounting problems were due to the actions of senior managers who had betrayed their trust.

“As a longtime Nortel shareholder, I know personally how difficult and disappointing the past 4 1/2 years have been,” Wilson said. ”

http://www.newswire.ca/en/releases/archive/March2005/10/c3390.html

TORONTO, March 10 /CNW/ – Investors who purchased Nortel shares between April 24, 2003 and April 27, 2004 have launched a $3 billion class action suit
against Nortel Networks and the company’s auditors, Deloitte and Touche The suit also names several of Nortel’s former officers and directors,
including past president and CEO Frank Dunn, as defendants.

http://www.newswire.ca/en/releases/archive/December2006/04/c3587.html

“Nortel has been pleased with the service of Deloitte & Touche and, in particular, with the close collaboration provided in recent years. Deloitte
helped Nortel overcome significant challenges to ensure that our financial reporting is accurate and up-to-date. We thank them for their service and look
forward to continued work with them in other capacities going forward,” said Currie. KPMG was also selected as Nortel Networks Limited’s independent auditor
commencing with fiscal 2007.

http://www.canada.com/nationalpost/financialpost/story.html?id=756a10e1-0b23-4150-ac56-97748b429d79&k=10806

One answer is that other auditors are not in a position to do a better job than Deloitte, and might not be willing or able to tackle Nortel, Mr. Mackenzie said.

if Nortel was to seek a new auditor, it would be faced with another problem — lack of choice. There have been almost constant concerns about the lack of options for firms seeking auditors since Arthur Andersen collapsed in the wake of the Enron Corp. scandal

Nor would a smaller firm have deep enough pockets to assume Nortel-sized litigation risks. But even if Deloitte were taken off the account, other auditors could be reluctant to take its place, especially after Deloitte gave a “damning” opinion on the state of Nortel’s accounting controls last year as part of its audit, Mr. Salterio said. Nortel has endured “a horrible internal control meltdown,” which makes it a high-risk client for any auditor, he said.

the audit process at Nortel has “made a laughing stock of the [audit] industry,”

Nortel said the latest restatement is the result of a thorough review of sales contracts that showed the company was recording revenue in the wrong periods. The company will now be able to record higher revenue in future years.

There have been no significant changes in accounting standards to force a change in policy. Some observers said yesterday the restatement shows either Deloitte and Nortel still haven’t got the numbers right despite all the hundreds of thousands of billable hours, or the auditors are not able to stand up to Nortel’s management on decisions about accounting treatments.

A spokesperson for Nortel said yesterday the company does not have any intention of replacing its auditor, while Deloitte said the audit firm considers public discussion of their relationship with Nortel to be inappropriate.

How was it possible D&T did not stop Nortel’s wrong accounting on time?
Because of that alleged fraud which happened on D&T watching Nortel had to settle with shareholders for around $2.5 bill.
not only that but also Nortel had to pay more in last 3 years for D&T overtime work as well.
Total of $210 mill in last 3 years!
I don’t believe NT’s PR about the divorce decision
..
the decision “does not result from any disagreement or dissatisfaction”.
btw
Removing $5 bill from accounting books should not be called restatement; it should be called an attempt to cover up the fraud.

It is worth noting that although Deloitte will miss the business from the Nortel account, the dollar figure quoted is historical and unlikely to have been the future Nortel audit revenue.