Ammo For Sale

« « Carnival of Liberty | Home | Looting » »

More tax shelter blogging

I mentioned KPMG’s indictment earlier. I found it odd that no news story I read was clear regarding what exactly KPMG did. The media used weasel words like tax shelter because, let’s face it, this accounting and tax law stuff is hard to grasp. As a general rule, tax evasion is illegal while tax avoidance is not. So, I did some searching and found:

The tax shelters that KPMG sold have still not been definitively ruled illegal by courts. But the government says KPMG intentionally failed to register the shelters as required, with one internal memo saying the profits from selling the shelters were enough to offset the potential civil penalties for failing to register them.

Holy shades of Martha Stewart, Batman! It seems there’s no ruling that what they did was illegal. There’s only the fact they didn’t register the shelters. However, the internal memo sort of indicates KPMG’s arrogance in dealing with the .gov. But, I’m still not exactly sure what KPMG did. More:

Major auditing firms have what amounts to a public franchise, since the law requires publicly traded companies to get independent audits.

The price of that franchise, in part, is to not come across as too hostile to the government, whether in its efforts to administer the tax law or to prevent accounting fraud. KPMG ignored that reality, to its eventual cost.

KPMG’s determination was not unique in the auditing industry. Arthur Andersen, which also questioned the SEC’s authority over accountants, bitterly resisted an SEC enforcement action that included civil fraud allegations over its audit of Waste Management, although it eventually settled.

But in the year after that settlement, Andersen did not appear to be changing the practices that had offended the commission, a fact that left it in a bad position when Enron, an Andersen audit client, collapsed. Andersen might have failed even if criminal charges had not been filed, but those charges sealed its fate.

Had KPMG been less certain that only it knew what was right, the cost of its actions would have been far lower. It is fortunate for KPMG, however, that Andersen failed first, leaving regulators fearful of what would happen if the demise of KPMG left only a Big Three in accounting. Were it not for that worry, KPMG itself might now be under indictment.

Ouch. If I was one of four companies that essentially have a guaranteed market due to governmental regulation, I would not be as hostile towards the governmental regulatory bodies. After all, that which is given by law can be taken by law.

Comments are closed.

Remember, I do this to entertain me, not you.

Uncle Pays the Bills

Find Local
Gun Shops & Shooting Ranges


bisonAd

Categories

Archives