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New York Fed Files "Audited" 2009 Results, Deloitte "Signs Off"
The FRBNY released its 2009 audited financial results today. The biggest bank of the Federal Reserve Board did not report anything unknown, and as for the things that should be reported, well those of course will never be known until there is something akin to a peasant revolt. Instead we paid particular attention to the language from the auditors (no, not E&Y this time), Deloitte, who signed off on the report. Some memorable phrases uncovered: "FRBNY's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the FRBNY; (2) provide reasonable assurance that transactions are recorded as necessary... and that receipts and expenditures of FRBNY are being made only in accordance with authorizations of management and directors of FRBNY; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of FRBNY's assets that could have a material effect on the consolidated financial statements." And here is the boilerplate understatement of the millennium: "Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis." Now we know when the lawsuits are flying in a year or two, just what line will be Deloitte's saving loophole phrase.
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"Collusion" is spot on. One of the little reported facts that emerged out of the Repo 105 scandal is that the Fed had facilitated similar transactions with Lehman.
Am I allowed to put such a disclaimer at the bottom of my income tax form?
+1
100% pure lawlessness.
Standard CYA clause, they put the same thing on pension fund reports when they "sign off" on those too!
Toilette & Douche.... they signed off on Adelphia Cable's fraud... and the "round trip" trading from Duke Energy, El Paso, and Reliant Energy...
FRBNY chose a winner... But personally, I would have opted for Arthur Andersen as they have handled much bigger cover ups.
"...personally, I would have opted for Arthur Andersen..."
I Would Have Gone With Madoff's Guys...
"Friehling & Horowitz, operated from a 13-by-18-foot office... "
1 filing cabinet, easy to shred all the files, two guys... one is dead/ retired, the other only plays golf, whole place can be moved to Larchmont in an hour...
What's not to love?
Standard boilerplate. Can't imply any special meaning related to Deloitte or the Fed from this. However, it does show to go you why the current audit opinion is pretty worthless.
The whole point of an audit is to determine that there is no collusion or management override of the internal controls that would cause reports to contain material mistatements. Internal controls do not have inherent limitations.
There was no audit. Only an examination of how the report data was compiled. Reasonable detail is not an audit term. Reasonable assurance is an examination term.
For example, the SEC is reasonably certain that the reasonable detail of Madoff's records proved that he was not a crook. If only there had been an audit.
Enron was merely the very early warning shot of what will become known as the GFP:
Global
Financial
Pandemic
And Y2K a dress-rehearsal for personal preparedness.
Yes, remember folks, you heard it first right here on "Roller Derby".
About time for a vodka tonic.
of course there is nothing unknown on the frbny balance sheet, they did a repo 105!!!
I believe everything they say. They would never lie, they would never hide anything, they care about me and you, they are out for the common good.
I am a C-359 Robot.
Could someone send this to ron paul and let him know what an idiot he is....
jus sayin'.
Sorry, Tyler, I agree with retheauditors - - This is standard boilerplate internal audit language a la Sarbanes-Oxley Act (Section 404) on ICFR, which has been around since even before Enron days. We can't and shouldn't read any more into this rep by D&T than what is clearly states: material misstatements due to error and, yes, even fraud, may not be prevented or detected on a timely basis by external auditors. You wont find an independent auditor on the planet that would attest otherwise.
The more interesting/important story you need to break is the who, what, where, when, how and why on potentially shady financial reporting @ FRBNY - forget D&T!
Agreed with AngelFace here also. This is boiler plate for every audit ever done. The problem is that no audit firm would ever take on audit if that were responsible for finding every fraud or collesion. They are only provide some level assurance. Secondarily no-one could afford the audit fees if external auditors were responsible for finding all fraud!
D & T signing off a 2009 NYFED
comes as no surprise: all the damage
was done in 2008 and shifted
to non-transparent balance sheets
as the Fed's. Nevertheless, I would be curious to
know which FED institution, or is it the
Treasury, runs the PPT program and
to what extent its shows on the 'balance sheet'
or is written in 'Special operations'
The Fed would never provide an auditor any real documents. What, so they can say holy shit this whole thing is a SCAM!!!!
and you know this based on past experience or using your magic 8 ball?
And you know it's not true based on what, the Fed's website?
Oh, how about 75 years of clean audits....
And no real accusations of impropriety in the audits....
Track record is everything.
"Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis."
"We're lying, and if you want to say anything about it, then go fuck yourself."
D&T? Ah! Brings back memories from one of my previous stints at a wall street joint. These guys charge $350/- an hour to put checks against an excel spreadsheet. Nice work if you can get it.
Kalki
If the Fed earned $8B on a $360B MBS portfolio, that means the portfolio is only returning 2.2% a year. How is that possible given that mortgage rates from 2000-2008 were at least 4.25%?
reading this..Fed is broke
I would really like to dig deep into how the FED clears transactions. I have been trying to figure this out for about 2 years now. If you try and see how a broker may have to approach the clearing you can see that there are certain accounting limitations from the premise of how the two entry system is supposed to work in order to balance the books. The overall concept of why the system allows an easy way to check, that is, to balance.
A broker as a private corporation has certain constraints that the FED does not. It is the special handling of the "FED" accounting that interests me. There seems to be an accommodation between the FEDs and the member banks. It is like the FED is full service in adjusting the accounts for the member banks. Regardless of what they do within the proxy of plausible collateral. What is interesting is this mechanism seems to be automatic in terms of the accoounts recorded at the FRBNY.
Mark Beck