Collaborative IQ
Audit value?
How is this for an assessment of audit value? From a little internet correspondence:
The work product of auditors, by and large for Fortune 1000 companies, is complete bullshit. The first thing they taught us about valuation analysis is that public disclosure is complete crap, and that's the general tune of all of Wall Street...and they by and large determine valuation and trading levels for all of these concerns. Even the company's internal numbers are so dramatically different than the public ones, that it's really shocking. So, auditor's products are almost viewed like for of financial advertising...devoid of truth and full of spin.
Real world expertise?Maybe Cox will be better than the rest of us at sniffing out fraud and financial malfeasence -- he's got some relevant experience, after all:
THE lawyer solemnly told regulators it would be far too costly for a mutual fund to seek appraisals of its assets, and no appraisals were made. When employees of the investment firm suspected something was amiss, they were reassured when a government auditor pored over the books and concluded that all was well.
And so the fraud continued for more than a decade. It later turned out that the assets sold to investors were largely fictitious, and that the supposed auditor, who presented credentials showing she worked for the California Department of Corporations, was in reality an actress hired by the man running the fraud.
The lawyer who argued that it would be a waste of money to require appraisals is about to be inundated with appeals to reduce the cost of regulation. That lawyer was Christopher Cox, who is likely to be confirmed today as chairman of the Securities and Exchange Commission. Mr. Cox did not know he was representing a crook at the time he wrote the letter. It was years later that William Edward Cooper, whose investment firm Mr. Cox was representing, pleaded guilty and was sentenced to 10 years in prison.
At his confirmation hearing this week, Mr. Cox emphasized that he was dismissed as a defendant in the civil suit filed by the receiver for the defrauded funds. He did not point out that Latham & Watkins, his former law firm, paid an undisclosed amount to settle the suit.
Palmkin Demolition Part I
Dear Palmkin,
I don't know how to respond to you civilly, so I will blog instead. Viva la Internet! I am opperating on the assumption that this will fly under all radar screens and therefore remain essentially private. If not -- oops!
I plan on responding to little chuncks of your letter as the mood strikes, so chunk one:
"
Overall, we believe that the RFP question about the value of the auditing profession is simply not adequately addressed. Rather, the draft substitutes a focus on vaguely defined “audit quality” as a more important issue that is somehow related to value. We believe that this is not responsive to the RFP. "
I must admit that it is difficult to imagine that your inability to understand how quality relates to value is not willful. Are you arguing that an audit signed by a group of monkeys in a room is as valuable as a DT audit? If so, the question of the value of an audit does indeed become something more than a rhetorical question. And if audits done by monkeys and those done by DT are indeed of different values, the question then remains, by how much? And there we arrive, with a screeching halt, at the notion of quality. Because, really, that is what divides DT from a roomful of monkeys, no? (Unless the whole question of souls matters, but I digress...)
As an aside, who gives a rat's ass if we respond to the RFP? What matters, for contractual purposes, is whether we did what we said we would do in the proposal and the various memoranda of understanding that followed. And certainly, the notion of assigning a value to an undefined "auditing" is irrelevant from any public policy perspective too. Instead, we can talk usefully about assigning values to audits done by monkeys, or audits done by management's yes-men, or audits done in minimum conformance to GAAP and GAAS, or audits done by those who take their duty to shareholders seriously.
Sigh.
Maybe I'm back...we'll see if I have a moment to actually write anything, but I've been having bloggish urges lately...
The Candidate is Dead, Long Live the Candidate
So Dean is out, Kerry is in (my affections, that is--let's see if my talent at picking losers kills Kerry's campaign). I'm starting to like the idea of Kerry sailing into the presidency with his craggy, presidential visage. Dean is his bulldog, keeping those of us madder than hell at Bush happy, while Kerry can appear above the fray for those fabled swing voters who can't stand conflict or negativity even when it is justified. I'm rooting for Bill Richardson, governor of New Mexico, as second billing on the ballot. I hear only good things about him, and he has intelligence, Southern-ness, and Hispanic-ness all wrapped in one. Edwards, Dean, Gephardt, et al can all have cabinet positions, should it come to that.
Ahhh. A beautiful daydream.
And on to the reality of the current administration. Read yesterday's
press briefing for hilarity and insight into why these guys just have to go.
Keep voting in those primaries, keep sending money to the candidate of your choice, and show the Bushies that we are not idiots.
Musings on Dean II
Some reasons I STILL want Dean to win, despite the tumult of the past week and the increasingly impressive performances of his rivals:
1. Dean is an open book. What you see is what you get, which is why he is so hard to catagorize--he is a complex person and it is all there to see. It is a breath of fresh air after the (very different) dishonesties of our past two presidents.
2. He was the one of the 9 to first say that our beloved emperor W was wearing no clothes. He gets big loyalty points for being brave enough to speak first.
3. This is the most powerful reason why I still support Dean, and I don't think it has been articulated clearly anywhere: Dean is not beholden to "special interests" he is beholden to the thousands of private individuals who have given him tiny amounts of money. I believe that should we ever get lucky enough to have a Dean White House that it will change completely the dynamics of politics in Washington. I may be wrong, but it is this dream that keeps me involved.
Musings on Dean I
So I have broken my New Year's resolution to write regularly, but I'll try to get better. I just got an interesting piece on why Dean may have faltered so badly in Iowa. I don't know if it is right, but it is certainly an intriguing theory:
Is Social Software Bad for the Dean Camapign?
I'm getting the same cognitive dissonance listening to political
handicappers explain Dean's dismal showing in Iowa that I used to get
listening to financial analysts try to explain dot com mania with
things like P/E ratios and EBITDA. A stock's value is not set by those
things; it is set by buyer and seller agreeing on price. In ordinary
markets, buyers and sellers use financial details to get to that
price, but sometimes, as with dot com stocks, the way prices get
agreed on has nothing to do with finance.
In the same way, talking about Dean's third-place showing in terms of
'momentum' and 'character', the P/E and EBITDA of campaigns, may miss
the point. Dean did poorly because not enough people voted for him,
and the usual explanations -- potential voters changed their minds
because of his character or whatever -- seem inadequate to explain the
Iowa results. What I wonder is whether Dean has accidentally created a
movement (where what counts is believing) instead of a campaign (where
what counts is voting.)
And (if that's true) I wonder if his use of social software helped
create that problem.
We know well from past attempts to use social software to organize
groups for political change that it is hard, very hard, because
participation in online communities often provides a sense of
satisfaction that actually dampens a willingness to interact with the
real world. When you're communing with like-minded souls, you _feel_
like you're accomplishing something by arguing out the smallest
details of your perfect future world, while the imperfect and actual
world takes no notice, as is its custom.
There are many reasons for this, but the main one seems to be that the
pleasures of life online are precisely the way they provide a respite
from the vagaries of the real world. Both the way the online
environment flattens interaction and the way everything gets arranged
for the convenience of the user makes the threshold between talking
about changing the world and changing the world even steeper than
usual.
The rest of the article . . .
Happy New Year
I've been away for a long time, but one of my new year's resolutions is to write here regularly. I've discovered that I actually have a reader or two, and in the interest of not losing you, I promise to attempt writing something interesting on a regular basis.
My current obsession is the
Howard Dean campaign. Along with finding his politics mostly attractive (though I hope his trade-protectionist noises go away soon!), I think the way he is running his campaign is super-cool (yes, that is a technical term). One example: Somehow--I suspect it comes more from the programmer-geeks that have gotten excited about Dean than from campaign HQ--a tradition has evolved to discipline "trolls" on the blog by those reading the trolls to donate money to the campaign. This has kept the number of trolls way down. The same concept has spread to the rest of the campaign. A large part of Dean's reaction to some of the negative campaign ads about him is to put up one of his fundraising bats. I have been well trained. I just gave money this morning to Dean in honor of the Republican National Committee. They sent me a particularly slimy letter a while ago asking for donations:
"Dear Friend,
...Our records show we have not yet received your 2003 Republican National Committee member contribution!
...President Bush's agenda of lower taxes, strong homeland and national defense, and a real solution for Social Security and Medicare is right for America . . .
. . . but his positive vision still faces intense opposition in Congress from the liberal Democrats.
...Please don't turn your back on President Bush and our GOP leaders in Congress who are counting on your help. . ."
And an even slimier P.S:
"Our nation is very closely divided politically. We need the support of every Republican to provide the resources President Bush, the Republican Congress and our candidates need to defeat the liberal Democrats and fully enact our agenda. Please don't give up now. Renew your RNC membership today. Thank you."
I have no idea how I got on their mailing list! But anyone who'd like to help stop the RNC fully enacting their agenda (and bankrupting the country) can join me by contributing $25 to Dean:
donate here. Or give to your favorite Democrat--just give to someone!
Regardless of your political leanings, I hope you have a very happy new year and visit often!
"Honesty is wealth, or turpitudinal peccadilloes"
The class I am taking on "Incentives and Organizations" has offered an unanticipated joy. Many of the articles we are reading were written before economists discovered mathematics and, in doing so, forgot the beauties of the English language. One particular gem that inspired today's title is Alchian and Demsetz's "Production, Information Costs, and Economic Organization" (American Economic Review, December 1972). Buried in a footnote is a sentence that has been a revelation (in the sense of something that is already there, but unseen or unarticulated): ". . . a reputation for "honest" dealings . . . is wealth". I am not sure Alchian or Demsetz quite realized the theological implications of their statement, but they brush close to "blessed are they which do hunger and thirst after righteousness: they shall be filled".
And any academic article that includes the phrase "turpitudinal peccadilloes" deserves to be read!
