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THE FALLING DARKNESS
The Effect   of the 2009 Global Financial and Ethical Crisis  upon  Certified Public Accountants  and their  Clients Quito...
THE FALLING DARKNESS    OR THE COMING DAWN <ul><li>&quot;At fifteen,  </li></ul><ul><ul><ul><li>I aspired to  </li></ul></...
<ul><li>&quot;More cases of insolvency are to be attributed to  Frauds  than shrewd business men are aware of, and though ...
concurrent crises right now underway <ul><li>terrorism  </li></ul><ul><li>global warming (environmental) </li></ul><ul><li...
THE FALLING DARKNESS Where does crisis end and chaos begin?
During the past two decades two  famous …walls fell The Berlin Wall   and The Street named Wall... Walls
© The Washington Post From The Washington Post [Next 7 slides are © The Washington Post]
© The Washington Post
© The Washington Post
© The Washington Post
© The Washington Post
© The Washington Post
© The Washington Post
©  The Washington Post
© The Washington Post
© The Washington Post
Marketplace Myths (1) Government is, always and everywhere: wasteful, spendthrift, incompetent,  inefficient, uneconomical...
Marketplace Myths (2) The commercial market-place can,  always and everywhere:  allocate resources more efficiently than g...
<ul><li>The nature of the current crisis does not differ greatly from those before… </li></ul><ul><li>BUT the times differ...
 
If a   major depression   does arrive Ita will be much more complex to handle than that   of the 1930’s due to the fact th...
WHY ARE WE SO  INTERESTED IN MONEY? MONEY CRISIS
MONEY can buy a house, but not a home,
MONEY   CAN BUY A BED, BUT NOT SLEEP,
MONEY   CAN BUY A WATCH, BUT NOT TIME,
MONEY   CAN BUY A BOOK,  BUT NOT KNOWLEDGE
MONEY   CAN BUY A HIGH POSITION, BUT NOT RESPECT,
MONEY   CAN PAY A DOCTOR, BUT NOT BUY HEALTH,
MONEY   CAN BUY BLOOD, BUT NOT LIFE
MONEY   CAN BUY SEX, BUT NOT LOVE
Bank Losses since 2007
The  Present major World Crisis  is not only  FiINANCIAL... it is also ETHICAL THE  FALLING DARKNESS
 
<ul><li>We have tall skyscrapers but they rapidly fall to pieces;   </li></ul><ul><li>we have supersonic airplanes but the...
<ul><li>Paradox 2009 – Planet Earth, Year 2009, 20th Century,  </li></ul><ul><li>Third Millennium, First Decade  -  We see...
<ul><li>Paradox 2009 – Planet Earth, Year 2009, 20th Century, Third Millennium, First Decade   </li></ul><ul><li>We seek C...
from Confucius
 
THE FALLING DARKNESS “ We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has ...
THE FALLING DARKNESS “ We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has ...
“ We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the hall...
<ul><li>Obama American Recovery and Reinvestment Plan </li></ul><ul><ul><li>Doubling the production of alternative energy ...
U.S. Losses May Reach $3.6 Trillion   <ul><li>  By Henry Meyer and Ayesha Daya  © Bloomberg </li></ul><ul><li>Jan. 20 (Blo...
Charts  – 2008 Global Bailouts USA: Bush: Emergency Economic  Stabilization Act of 2008  $700,000,000,000 Obama: American ...
AICPA ISSUES AUDIT RISK ALERT <ul><li>“ The U.S. is experiencing great economic instability and the U.S. government is tak...
AICPA AUDIT RISK ALERT AUDIT & ACCOUNTING <ul><li>Some risks may include:  </li></ul><ul><li>constraints on the availabili...
AICPA AUDIT RISK ALERT  Causes of the Crisis <ul><li>“ Among the causes that have been cited for the economic crisis...(is...
Declaration on the Global Financial Crisis and the Role of Accountants and Auditors  -   RECOMMENDATIONS by the Interameri...
“ Fair Value Accounting is causing a large part of the problem at this moment…” Steve Bartlett, President and CEO Financia...
  USG Bailouts 1970-2007 USG Bailouts 1970-2007 Total $347,200,000,000 $18.6 billion 2001 Airline Industry $293.3 billion ...
  USG Bailouts 2008 USG Bailouts 2008 Total $1,369,900,000,000 & more to come $17.4 billion 2008 Chrysler/G.M. $247.5 bill...
TOTAL BAILOUTS for CURRENT CRISIS ...so far $ 2,194,900,000,000 Expended and planned
KEY POINTS – personal opinions <ul><li>Many, if not all, of the present crises are intimately related and they affect each...
KEY POINTS – personal opinions <ul><li>5.  The expenditure of the vast sum of money expected to (but not sure to) control ...
KEY POINTS – personal opinions <ul><li>c .  Crisis turns into chaos ...a return to oppression.  A collapse of the world ec...
Pessimism of Financial Executives at All Time High <ul><li>From a survey of chief financial officers and senior-level exec...
Financial Executive CPA’s discount short-term improvements <ul><li>From a survey of chief financial officers and senior-le...
Extracts from the article “After The Crash: We shall need a New Market!” (1)   by Robert Peston of BBC  NEWS   (next 4 sli...
After The Crash: We shall need a New Market! (2) <ul><li>The biggest lesson of all is that  we are a million miles from ha...
After The Crash: We shall need a New Market! (3) <ul><li>They’ll almost certainly be  paid less for doing more , because t...
After The Crash: We shall need a New Market!  (4) <ul><li>Some may see this as a threat to national sovereignty, as the th...
“ In November 2002, Federal Reserve Chairman Ben Bernanke cracked wise in his now infamous ‘Helicopter Theory’ speech. Whe...
Global Trends 2025:  A Transformed World   published by the   National Intelligence Council   <ul><li>“… the impacts from ...
 
 
 
 
Anti-Corruption: Expect tighter enforcement in hard times     A   Control Risks Group White Paper   <ul><li>“ In the midst...
<ul><li>“ It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from thei...
The Invisible Hand <ul><ul><ul><ul><ul><li>Needs a visble glove so we can see what it is dong and, if necessary regulate i...
“ I argue that the first fundamental theorem of welfare economics - asserting the efficiency of competitive markets -  is ...
The Colonial Version of Trade The New Reverse-Colonial Version of Trade  The colonial powers – notably Britain; Netherland...
” The financial statements have been prepared in accordance with standards for Financial Reporting and Accountng for Unpri...
Therefore,  using “Creatively Regulated Accounting Practices” (CRAP) we hereby certify that these financial statements rep...
<ul><li>“ Without a moral basis   capitalism would just become the means by which the powerful would concentrate their wea...
Technology
? What is Corruption The Ethics Crisis
Corruption? Cancer?  Fungus? Plague?   Curse? AIDS?   Insanity? The Ethics Crisis
Corruptionn is a HEART  Problem The Ethics Crisis
The Ethics Crisis
corruptium < cor  ruptum The Ethics Crisis
cor  ruptum < heart broken The Ethics Crisis
The corruption triangle <ul><li>POWER </li></ul><ul><li>  </li></ul><ul><li>CONTROL     STANDARDS </li></ul><ul><li>  & VA...
<ul><li>Questioner : Dr. Krugman, what do you intend to do with your  $1.4 million  Nobel Prize money? </li></ul><ul><li>P...
<ul><li>&quot; A ccountability   isn't hard to define.  It's the concept that  every individual is responsible for his or ...
An Ancient Concept...still true … encourage the young men to be  self-controlled . In everything  set them an example  by ...
“ With self discipline  Almost anything  is possible.” Teodoro Roosevelt
The world never ceases to turn Remember
Today's bleak outlook  may turn into tomorrow's joyous dawn Remember
 
“ The day may dawn when fair play, love for one’s fellow man, respect for justice and freedom, will enable tormented gener...
Darkness need not fall!
 
 
THE COMING DAWN <ul><ul><ul><ul><ul><li>A code of ethics  </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>that has  ...
Thank  You www.jimwes.com Jim
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The Effect of the Global Financial and Ethical Crisis upon CPA's and their Clients

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Discussion of crisis, bailouts, recovery plans and effects.
Statements of American Institute of CPAs and Interamerican Accounting Association. Bank losses, scenarios of possible impact.


Presentation at Americas' Conference 2009 of Russell Bedford International, Quito, Ecuador, Jan. 24, 2009

Published in: Economy & Finance
  • A very much to the point interpretation that highlights and explains the deplorable economic state we are in, as result of mutual greed. It basically is the lack of (self) discipline that was neglected.
    It shows the wrongs of spending out of this crisis, and as before not many are listening and take it to heart. It is the herd mentality that brought us into this mess. No one believed the few that clearly analysed years ago that this was going to happen. More prudence would have saved us for this recession that easily might turn into a depression. By now it might be obvious that Mr. Greenspan and Mr. Bush’s orchestrated money pumping into the market that started in 2001/2, was not the right approach to keep the economy running in providing easy money to people for spending, which was not theirs, for buying things they really did not need! Apparently our Helicopter pilot Mr. Bernanke has not understood the mistakes his predecessor made. You cannot solve this crisis by pumping more and more money into the economy. Let Mr. Market do the job and support only where it strictly is needed. James Wesberry gave a clear knowledgeable and not to misunderstand explanation. However politicians and authorities remain heedless. Our children and grandchildren for generations to come will bear the brunt.
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The Effect of the Global Financial and Ethical Crisis upon CPA's and their Clients

  1. 1. THE FALLING DARKNESS
  2. 2. The Effect of the 2009 Global Financial and Ethical Crisis upon Certified Public Accountants and their Clients Quito, Ecuador January 24, 2009 Americas Conference Russell Bedford International by Jim Wesberry THE FALLING DARKNESS
  3. 3. THE FALLING DARKNESS OR THE COMING DAWN <ul><li>&quot;At fifteen, </li></ul><ul><ul><ul><li>I aspired to </li></ul></ul></ul><ul><ul><ul><li>learning. </li></ul></ul></ul><ul><li>At thirty, </li></ul><ul><ul><ul><li>I established my stand. </li></ul></ul></ul><ul><li>At forty, </li></ul><ul><ul><ul><li>I had no delusions. </li></ul></ul></ul><ul><li>At fifty, </li></ul><ul><ul><ul><li>I knew my destiny. </li></ul></ul></ul><ul><li>At sixty, </li></ul><ul><ul><ul><li>I knew truth </li></ul></ul></ul><ul><ul><ul><li>in all I heard. </li></ul></ul></ul>At seventy, I could follow the wishes of my heart without doing wrong.&quot; Confucius said: ?
  4. 4. <ul><li>&quot;More cases of insolvency are to be attributed to Frauds than shrewd business men are aware of, and though the advice is almost universally unpopular, it is urged on merchants to overcome their disinclination for this species of labor, and give a little time to a thorough investigation of their accounts ....Newspapers daily chronicle the detection of new cases of embezzlement, and still our merchants shut their eyes and believe all servants dishonest but their own. While they admit the shrewdness of their accountants in other matters, they blindly imagine them too trustworthy, or too fearful of consequences to deceive them in regard to the manipulation of their finances; yet in case of the death of an old favorite bookkeeper, or even of a partner, who has </li></ul><ul><li>had the management of the cash, how often do we find that their apparently beautifully balanced accounts are teeming with a succession of fraudulent entries that had been continued through years.“ </li></ul><ul><ul><li>H. J. Mettenheimer, AUDITOR's GUIDE, Being a </li></ul></ul><ul><ul><li>Complete Exposition of Bookkeeper's Frauds , 1869 </li></ul></ul><ul><ul><li>(The United States of America's first known </li></ul></ul><ul><ul><li>book on auditing). </li></ul></ul>
  5. 5. concurrent crises right now underway <ul><li>terrorism </li></ul><ul><li>global warming (environmental) </li></ul><ul><li>official corruption considered inevitable, or even “normal” </li></ul><ul><li>public deficits and debt </li></ul><ul><li>economic instability </li></ul><ul><li>Organized crime and gangs (Mexico, etc.) </li></ul><ul><li>family instability </li></ul><ul><li>ongoing war (Iraq, Afghanistan) </li></ul><ul><li>pending war (Palestine, Israel, Iran, North Korea) </li></ul><ul><li>authoritarianism (dictatorships) </li></ul><ul><li>“ 21st century socialism” </li></ul><ul><li>loss of credibility of Legislative and Judicial branches </li></ul><ul><li>the prostitution of democracy (“dollarcracy’’) </li></ul><ul><li>religious extremism & other fanaticisms </li></ul><ul><li>cultural and ethical decline </li></ul><ul><li>and many, many others </li></ul>Concurrent Crises now underway
  6. 6. THE FALLING DARKNESS Where does crisis end and chaos begin?
  7. 7. During the past two decades two famous …walls fell The Berlin Wall and The Street named Wall... Walls
  8. 8. © The Washington Post From The Washington Post [Next 7 slides are © The Washington Post]
  9. 9. © The Washington Post
  10. 10. © The Washington Post
  11. 11. © The Washington Post
  12. 12. © The Washington Post
  13. 13. © The Washington Post
  14. 14. © The Washington Post
  15. 15. © The Washington Post
  16. 16. © The Washington Post
  17. 17. © The Washington Post
  18. 18. Marketplace Myths (1) Government is, always and everywhere: wasteful, spendthrift, incompetent, inefficient, uneconomical and ineffective Business is, always and everywhere: ethical, frugal, thrifty, competent, efficient, economical and effective Private enterprise can, always and everywhere, operate more efficiently and effectively than a public enterprise .
  19. 19. Marketplace Myths (2) The commercial market-place can, always and everywhere: allocate resources more efficiently than governments . There is no market failure. Always and everywhere, there is only governmental interference, together with policy and regulatory failure.
  20. 20. <ul><li>The nature of the current crisis does not differ greatly from those before… </li></ul><ul><li>BUT the times differ greatly </li></ul><ul><li>the scope and size differ greatly </li></ul><ul><li>the technology in use differs greatly </li></ul><ul><li>the interlinkage of the world </li></ul><ul><li>financial system differs </li></ul><ul><li>greatly, and </li></ul><ul><li>the people involved </li></ul><ul><li>differ very, very greatly. </li></ul>
  21. 22. If a major depression does arrive Ita will be much more complex to handle than that of the 1930’s due to the fact that a much greater degree of selfishness, unethical conduct, crime and corruption will accompany it.
  22. 23. WHY ARE WE SO INTERESTED IN MONEY? MONEY CRISIS
  23. 24. MONEY can buy a house, but not a home,
  24. 25. MONEY CAN BUY A BED, BUT NOT SLEEP,
  25. 26. MONEY CAN BUY A WATCH, BUT NOT TIME,
  26. 27. MONEY CAN BUY A BOOK, BUT NOT KNOWLEDGE
  27. 28. MONEY CAN BUY A HIGH POSITION, BUT NOT RESPECT,
  28. 29. MONEY CAN PAY A DOCTOR, BUT NOT BUY HEALTH,
  29. 30. MONEY CAN BUY BLOOD, BUT NOT LIFE
  30. 31. MONEY CAN BUY SEX, BUT NOT LOVE
  31. 32. Bank Losses since 2007
  32. 33. The Present major World Crisis is not only FiINANCIAL... it is also ETHICAL THE FALLING DARKNESS
  33. 35. <ul><li>We have tall skyscrapers but they rapidly fall to pieces; </li></ul><ul><li>we have supersonic airplanes but they can be converted into flying bombs; </li></ul><ul><li>we ended a world war, but we continue to wage regional, territorial and national wars; </li></ul><ul><li>we ended the cold war, but we have hot terrorism; </li></ul><ul><li>we have great multinational enterprises, but they go bankrupt at the drop of a hat; </li></ul><ul><li>we have global firms of lawyers and auditors, but they lose sight of professionalism; </li></ul><ul><li>we have outstanding stockbrokers and bankers, but we cant trust them; </li></ul><ul><li>we have all-powerful governments, but they are deaf to the cry of poor children; </li></ul><ul><li>we have promising leaders, but they are duplicitous; </li></ul><ul><li>we have dynamic executives, but they are selfish; </li></ul><ul><li>we have many job applicants, but they do not want to serve the public; </li></ul>The Ethics Crisis Paradox 2009 – Planet Earth, Year 2009, 20 th Century, Third Millennium, First Decade We seek Confidence, Quality and Strength in times of Change, Crisis, and Corruption
  34. 36. <ul><li>Paradox 2009 – Planet Earth, Year 2009, 20th Century, </li></ul><ul><li>Third Millennium, First Decade - We seek Confidence, Quality and Strength in times of Change, Crisis, and Corruption </li></ul><ul><li>we have idealistic men and women, but they become lost in the pursuit of elegant, promiscuous and dangerous lifestyles; </li></ul><ul><li>we have tall buildings, but short tempers; </li></ul><ul><li>we have broad superhighways, but narrow points of view; </li></ul><ul><li>we have strong financial institutions, but weak financial results; </li></ul><ul><li>we spend more, but have less; </li></ul><ul><li>we buy more, but take little pleasure in our belongings; </li></ul><ul><li>we have bigger houses, but smaller families; </li></ul><ul><li>we have more electronic and digital gadgets, </li></ul><ul><ul><ul><ul><li>but less time to use them; </li></ul></ul></ul></ul><ul><li>we have more university degrees, but less common sense; </li></ul><ul><li>we have greater knowledge, but lesser good judgement; </li></ul><ul><li>we have more specialists, but also more problems; </li></ul><ul><li>we have better medicines, but poorer health; </li></ul>The Ethics Crisis
  35. 37. <ul><li>Paradox 2009 – Planet Earth, Year 2009, 20th Century, Third Millennium, First Decade </li></ul><ul><li>We seek Confidence, Quality and Strength in times of Change, Crisis, and Corruption </li></ul><ul><li>we drink too much, </li></ul><ul><li>we smoke too much; </li></ul><ul><li>we eat too much; </li></ul><ul><li>we spend too much; </li></ul><ul><li>we laugh little; </li></ul><ul><li>we complain a lot; </li></ul><ul><li>we drive fast in the city and even faster out of it. </li></ul><ul><li>we get mad like lighting; </li></ul><ul><li>we are slow to forgive; </li></ul><ul><li>we stay up too late; </li></ul><ul><li>we awaken very tired; </li></ul><ul><li>we read little; </li></ul><ul><li>we watch TV too much; </li></ul><ul><li>...and we pray ?… only when we are </li></ul><ul><li> . </li></ul>The Ethics Crisis DESPERATE
  36. 38. from Confucius
  37. 40. THE FALLING DARKNESS “ We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has only deepened over the last few weeks. Nearly two million jobs have now been lost,…2.8 million Americans who want and need full-time work have had to settle for part-time jobs. Manufacturing has hit a twenty-eight year low. Many businesses cannot borrow or make payroll. Many families cannot pay their bills or their mortgage. Many workers are watching their life savings disappear. And many, many Americans are both anxious and uncertain of what the future will hold.” President Barack Obama:
  38. 41. THE FALLING DARKNESS “ We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has only deepened over the last few weeks. Nearly two million jobs have now been lost,…2.8 million Americans who want and need full-time work have had to settle for part-time jobs. Manufacturing has hit a twenty-eight year low. Many businesses cannot borrow or make payroll. Many families cannot pay their bills or their mortgage. Many workers are watching their life savings disappear. And many, many Americans are both anxious and uncertain of what the future will hold.” President Barack Obama
  39. 42. “ We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, DC. For years, too many Wall Street executives made imprudent and dangerous decisions, seeking profits with too little regard for risk, too little regulatory scrutiny, and too little accountability. Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn’t afford. Politicians spent taxpayer money without wisdom or discipline, and too often focused on scoring political points instead of the problems they were sent here to solve. President Barack Obama: The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.”
  40. 43. <ul><li>Obama American Recovery and Reinvestment Plan </li></ul><ul><ul><li>Doubling the production of alternative energy in the next three years. </li></ul></ul><ul><ul><li>Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes </li></ul></ul><ul><ul><li>Making...immediate investments…(to)…ensure…all… </li></ul></ul><ul><ul><li>medical records are computerized. </li></ul></ul><ul><ul><li>Equipping…schools, community colleges, and public universities with 21st century classrooms, labs, and libraries. </li></ul></ul><ul><ul><li>Expanding broadband across America </li></ul></ul><ul><ul><li>Investing in the science, research, </li></ul></ul><ul><ul><li>and technology…(for)… new medical </li></ul></ul><ul><ul><li>breakthroughs, new discoveries, </li></ul></ul><ul><ul><li>and entire new industries. </li></ul></ul><ul><ul><ul><ul><ul><li>Source: www.whitehouse.com </li></ul></ul></ul></ul></ul>
  41. 44. U.S. Losses May Reach $3.6 Trillion <ul><li> By Henry Meyer and Ayesha Daya © Bloomberg </li></ul><ul><li>Jan. 20 (Bloomberg) -- U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis. </li></ul><ul><li>“ I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.” </li></ul><ul><li>Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg… </li></ul>
  42. 45. Charts – 2008 Global Bailouts USA: Bush: Emergency Economic Stabilization Act of 2008 $700,000,000,000 Obama: American Recovery and Reinvestment Plan $825,000,000,000 UK (Banks) $217,813,500,000 Denmark (Banks) $ 18,000,000,000 France (Banks) $ 13,600,000,000
  43. 46. AICPA ISSUES AUDIT RISK ALERT <ul><li>“ The U.S. is experiencing great economic instability and the U.S. government is taking unprecedented actions in efforts to curtail the economic crisis… </li></ul><ul><li>The length of the recession and if the U.S. enters into a depression is yet to be determined. </li></ul><ul><li>There is no doubt the U.S. has taken unprecedented actions to prevent worsening economic conditions including facilitating sales of ailing financial institutions, passing the Emergency Economic Stabilization Act of 2008, rescuing the U.S. automakers, and dramatically increasing the monetary programs available from the Federal Reserve…. </li></ul><ul><li>Few, if any, industries are immune to the affects of the crisis so it is more critical than ever for auditors to understand the rapidly changing business, economic, and regulatory environments in which your clients operate.” (emphasis added) </li></ul>
  44. 47. AICPA AUDIT RISK ALERT AUDIT & ACCOUNTING <ul><li>Some risks may include: </li></ul><ul><li>constraints on the availability of capital and credit, </li></ul><ul><li>going concern and liquidity issues, </li></ul><ul><li>marginally achieving explicitly stated strategic objectives, </li></ul><ul><li>use of off-balance-sheet financings, </li></ul><ul><li>special-purpose entities and other complex financing arrangements, </li></ul><ul><li>volatile real estate markets and the credit crisis , </li></ul><ul><li>which result in significant measurement uncertainty… </li></ul>
  45. 48. AICPA AUDIT RISK ALERT Causes of the Crisis <ul><li>“ Among the causes that have been cited for the economic crisis...(is)… FASB Statement No. 157 …(that)… defines fair value and establishes a framework for measuring fair value; however it does not dictate when an entity must measure something at fair value, nor does it expand the use of fair value in any way. </li></ul><ul><li>The specific area…in the spotlight is the lack of guidance in applying fair value in an illiquid or distressed market , such as the current one... a study of the effects of FASB Statement No. 157 on the current economic crisis…(was recently mandated by Congress)… </li></ul><ul><li>Another important topic…is determining when an investment is other-than-temporarily impaired . It is important to note that other-than-temporary does not mean permanent. Determining whether an other-than-temporary impairment has occurred requires significant judgment based upon numerous considerations and GAAP does not provide any “bright lines” in making this conclusion.” </li></ul>
  46. 49. Declaration on the Global Financial Crisis and the Role of Accountants and Auditors - RECOMMENDATIONS by the Interamerican Accounting Association (IAA) <ul><li>(Perform a)“Comprehensive review of financial instruments themselves including their valuation, recording and presentation in the financial statements. </li></ul><ul><li>Return to original historical value as an accounting principle in substitution for reasonable fair value as a means of properly presenting financial condition. This means we recommend the complete elimination of fair value accounting as a source of accounting entry. </li></ul><ul><li>Maintain fair value as complementary information as financial material for circumstantial reference...” </li></ul><ul><ul><ul><ul><li>(other recommendatios were also made) </li></ul></ul></ul></ul>
  47. 50. “ Fair Value Accounting is causing a large part of the problem at this moment…” Steve Bartlett, President and CEO Financial Services Roundtable Testimony to: U.S. House of Representatives Financial Services Committee 18 November, 2008
  48. 51.   USG Bailouts 1970-2007 USG Bailouts 1970-2007 Total $347,200,000,000 $18.6 billion 2001 Airline Industry $293.3 billion 1989 Savings & Loan $9.5 billion 1984 Continental Illinois $4.0 billion 1980 Chrysler $9.4 billion 1975 New York City $7.8 billion 1974 Franklin National Bank $1.4 billion 1971 Lockheed $3.2 billion 1970 Penn Central Railroad Cost in 2008 U.S. Dollars Year
  49. 52.   USG Bailouts 2008 USG Bailouts 2008 Total $1,369,900,000,000 & more to come $17.4 billion 2008 Chrysler/G.M. $247.5 billion 2008 Citigroup $700 billion 2008 Troubled Asset Relief Program $25 billion 2008 Auto Industry $150 billion 2008 American International Group (A.I.G.) $200 billion 2008 Fannie Mae / Freddie Mac $30 billion 2008 Bear Stearns Cost in U.S. Dollars Year
  50. 53. TOTAL BAILOUTS for CURRENT CRISIS ...so far $ 2,194,900,000,000 Expended and planned
  51. 54. KEY POINTS – personal opinions <ul><li>Many, if not all, of the present crises are intimately related and they affect each other. </li></ul><ul><li>All the crises regardless of scope are made extremely more complicated and unstable by the enormously advancing changes in technology at the fastest rate in history. </li></ul><ul><li>The Global Financial Crisis is directly and unequivocally linked to the crises of official corruption and ethical and cultural decline. This linkage directly affects Certified Public Accountants and their clients. </li></ul><ul><li>The effect of this double-headed crisis is almost impossible to predict due to the interaction of all the various crises mentioned plus the surging parallel impact of new technologies and other accelerating changes. </li></ul>
  52. 55. KEY POINTS – personal opinions <ul><li>5. The expenditure of the vast sum of money expected to (but not sure to) control the crisis will drastically affect the financial future of the USA and its citizens unto many future generations. In its present financial condition the country simply cannot afford it, but it cannot afford not to attempt it. A severe devaluation of the dollar accompanied by extreme inflation would appear to me to be absolutely inevitable. We have, of course, seen similar situations across Latin America. </li></ul><ul><li>6. We can only guess at that impact using several possible alternative scenarios: </li></ul><ul><ul><li>a. Return to “normalcy.” A significant recession that will pass fairly quickly as have all the other recent ones with the world economy stabilizing within one or two years, the Dow Jones stabilizing between 9,000 and 12,000 and eventually expanding again. </li></ul></ul><ul><ul><li>Long-Term Recovery. A much longer recession/depression that in the long run, perhaps four to ten years, will be largely overcome by governmental measures taken to strengthen the economy and better regulate financial markets, operations and transactions…or by mobilization for a new World War. </li></ul></ul>
  53. 56. KEY POINTS – personal opinions <ul><li>c . Crisis turns into chaos ...a return to oppression. A collapse of the world economic system including the decline and possible demise of the United States as a key global economic power resulting in chaos across the planet, widespread panic, disease, wars and readjustments of national alliances and boundaries, including the possibility of the larger nations breaking up into smaller more compatible groupings, some smaller nations merging and most nations finding it impossible to govern without extremely authoritarian regimes. This could conclude the past three century era of experimentation with democracy, capitalism, socialism and communism and result in a new era of powerful rulers like the old monarchies, the end of privacy and the suppression of most dissent. Several larger powers could eventually control the world…or wage war over it. (This is a worst case scenario. It could hopefully be somewhat less ominous). </li></ul>
  54. 57. Pessimism of Financial Executives at All Time High <ul><li>From a survey of chief financial officers and senior-level executive Certified Public Accountants conducted by the American Institute of Certified Public Accountants and the University of North Carolina’s Kenan-Flagler Business School </li></ul><ul><li>“ Most CPAs working in business and industry don’t expect any improvement in the U.S. economy before the second half of 2009 or the first half of 2010,”… </li></ul><ul><li>Pessimists outnumbered optimists by 16 to 1. </li></ul><ul><li>Eighty-two percent of respondents indicated they were pessimistic or very pessimistic, up from 62 percent in a previous similar survey. </li></ul><ul><li>18 percent of respondents said that they were “very pessimistic,” three times the number who felt that way in the earlier survey. </li></ul>
  55. 58. Financial Executive CPA’s discount short-term improvements <ul><li>From a survey of chief financial officers and senior-level executive Certified Public Accountants conducted by the American Institute of Certified Public Accountants and the University of North Carolina’s Kenan-Flagler Business School </li></ul>Forty-five percent of respondents now expect their companies to contract, while 31 percent of respondents still expect some expansion in the next twelve months. Only 9 percent expect the economy to begin to improve before the second half of 2009. Forty-two percent expect improvement in the second half of 2009, and 49 percent see no improvement at all until 2010 or later.
  56. 59. Extracts from the article “After The Crash: We shall need a New Market!” (1) by Robert Peston of BBC NEWS (next 4 slides) <ul><li>There are reasons to believe that credit from taxpayers can’t and won’t be repaid for many years , in that this credit is financing the correction of huge financial and trading imbalances between the western and eastern economies. </li></ul><ul><li>We’ve witnessed a semi-permanent nationalization of the banking system and will soon see significant taxpayer support for real companies in the real economy. </li></ul><ul><li>Thus, our banks and private-sector companies will have to work much harder to sustain the goodwill of those who are keeping them alive: millions and millions of taxpayers. </li></ul><ul><li>Robert Peston, 8 December 2008 [BBC NEWS] </li></ul>
  57. 60. After The Crash: We shall need a New Market! (2) <ul><li>The biggest lesson of all is that we are a million miles from having created the political and regulatory institutions to help us contain the risks of globalization. We and most of the world may well have been beneficiaries of the open global economy. But as millions lose their jobs in Europe and the US in the coming year, the benefits will be forgotten. </li></ul><ul><li>That means that those running our biggest commercial businesses will have to be more visible . They’ll have to manifest a genuine understanding not only of the anxieties of their employees but of all taxpayers. Those chief executives who succeed will be those who imbue in their businesses very simple, commonsense standards of decency . </li></ul><ul><li>Robert Peston, 8 December 2008 [BBC NEWS] </li></ul>
  58. 61. After The Crash: We shall need a New Market! (3) <ul><li>They’ll almost certainly be paid less for doing more , because the pricking of the debt bubble has undermined the institutions – the private-equity firms, hedge funds and investment banks – that were ratcheting up the pay of all business leaders. </li></ul><ul><li>If the unfettered movement of capital, goods and services is going to survive, if there’s not going to be a retreat into national fortresses that could impoverish all of us over the longer term, we’ll have to find a far better way of monitoring global risks and of bringing governments together to deal with these risks. </li></ul><ul><li>Robert Peston, 8 December 2008 [BBC NEWS] </li></ul>
  59. 62. After The Crash: We shall need a New Market! (4) <ul><li>Some may see this as a threat to national sovereignty, as the thin end of an anti-democratic wedge that’ll see the world ruled by unaccountable bureaucrats. Reconciling our political traditions with the imperative of making safe the globalised world will be a challenge , to put it mildly. But it’s not a challenge we can shirk. </li></ul><ul><li>Robert Peston, 8 December 2008 [BBC NEWS] </li></ul>
  60. 63. “ In November 2002, Federal Reserve Chairman Ben Bernanke cracked wise in his now infamous ‘Helicopter Theory’ speech. When it came time to pay our debts back, he said, we could simply fire up the printing press . The world would be forced to accept our paper in lieu of those debts. If need be, the Fed “could drop dollars from helicopters” in order to get the money into circulation. Unfortunately, traders around the globe didn’t react kindly to his comments: Since his speech, the dollar has declined over 40% against a basket of world currencies. It’s likely we’ll continue to see a steady downward trend in the dollar, occasionally punctuated by rallies as traders take profits. And it’s unlikely our government will be able to do anything soon to stop it… The Federal Reserve stopped reporting the M3 value, the U.S. money supply, in 2006. Best guess is it’s increasing at about a 10% rate. But about $1.5 trillion of additional ‘money’ in bank bailouts and credit will be put into the financial system in 2008 alone. When that much paper money is printed or electronically pumped into the credit markets you can bet your bottom dollar (excuse the pun) inflation will follow.” Extracted from Money Morning Dollar Report titled “ Why the Federal Reserve Can’t Save the Dollar” Copyright 2008–present, Monument Street Publishing, LLC 105W.Monument St., Baltimore,MD 21201 “ Helicopter Theory”
  61. 64. Global Trends 2025: A Transformed World published by the National Intelligence Council <ul><li>“… the impacts from the financial crisis will depend heavily on government leadership. Proactive fiscal and monetary policies probably will ensure the current panic and likely deep national recessions will not turn into an extended depression, although reduced economic growth could slow globalization’s pace, increasing protectionist pressures and financial fragmentation.” </li></ul>
  62. 69. Anti-Corruption: Expect tighter enforcement in hard times A Control Risks Group White Paper <ul><li>“ In the midst of the worst financial crisis in recent history, lack of oversight and regulation is seen by many as one of the major causes for falling global markets. Increased regulations and greater government scrutiny are certain to come.” </li></ul>
  63. 70. <ul><li>“ It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.... </li></ul><ul><li>“ ....He intends only his own gain, and he is in this as in many other cases , led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest </li></ul><ul><li>he frequently promotes that </li></ul><ul><li>of the society more effectually </li></ul><ul><li>than when he really intends </li></ul><ul><li>to promote it.” </li></ul><ul><ul><ul><li>Adam Smith in Wealth of Nations </li></ul></ul></ul>
  64. 71. The Invisible Hand <ul><ul><ul><ul><ul><li>Needs a visble glove so we can see what it is dong and, if necessary regulate it. . </li></ul></ul></ul></ul></ul>
  65. 72. “ I argue that the first fundamental theorem of welfare economics - asserting the efficiency of competitive markets - is fundamentally flawed . Quite contrary to that theorem, competitive economies are almost never efficient...” Joseph E. Stiglitz, 2001 Nobel Laureate in Economics in Whither Socialism
  66. 73. The Colonial Version of Trade The New Reverse-Colonial Version of Trade The colonial powers – notably Britain; Netherlands; France; Portugal; Spain. – traded trinkets with, e.g. Indians; Chinese; Africans; Native Americans, in exchange for valuable gold, silver, spices and other items of wealth. The former colonial, colonized and other, powers – notably USA; Canada; Australasia; Western Europe; and, Japan. – buy trinkets and toys (including economy cars; computers; electronics; etc., from e.g. The: Indian sub-continentals; Chinese; Koreans; Malaysians; and, many others, in exchange for valuable Foreign Exchange Reserves
  67. 74. ” The financial statements have been prepared in accordance with standards for Financial Reporting and Accountng for Unpriceable Deriviatives (FRAUD)” Model Auditor's Opinion (1)
  68. 75. Therefore, using “Creatively Regulated Accounting Practices” (CRAP) we hereby certify that these financial statements represent a true and fair view of the state of affairs of the company, as at the date of the balance sheet and of the activities for the year then ended. Model Auditor's Opinion (2)
  69. 76. <ul><li>“ Without a moral basis capitalism would just become the means by which the powerful would concentrate their wealth”. </li></ul><ul><ul><ul><ul><li>Boris Fyodorov, Russian economic </li></ul></ul></ul></ul><ul><ul><ul><ul><li>reformer, died on </li></ul></ul></ul></ul><ul><ul><ul><ul><li>November 20, 2008, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>aged 50 </li></ul></ul></ul></ul>
  70. 77. Technology
  71. 78. ? What is Corruption The Ethics Crisis
  72. 79. Corruption? Cancer? Fungus? Plague? Curse? AIDS? Insanity? The Ethics Crisis
  73. 80. Corruptionn is a HEART Problem The Ethics Crisis
  74. 81. The Ethics Crisis
  75. 82. corruptium < cor ruptum The Ethics Crisis
  76. 83. cor ruptum < heart broken The Ethics Crisis
  77. 84. The corruption triangle <ul><li>POWER </li></ul><ul><li> </li></ul><ul><li>CONTROL STANDARDS </li></ul><ul><li> & VALUES </li></ul>Weakening of any one of these vertices precipitates corruption The Ethics Crisis
  78. 85. <ul><li>Questioner : Dr. Krugman, what do you intend to do with your $1.4 million Nobel Prize money? </li></ul><ul><li>Paul Krugman : It is now worth only $1.2 million , because of the change in the US$ exchange rate. </li></ul><ul><li>Anyhow, I have not, yet, decided. Right now, I am just trying to find a safe bank , in which to deposit the </li></ul><ul><li>money, whilst I make up my mind! </li></ul><ul><ul><ul><ul><li>Paul Krugman, Nobel Laureate </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Address to the National Press Club </li></ul></ul></ul></ul><ul><ul><ul><ul><li>19, December 2008 </li></ul></ul></ul></ul>Noble Nobel
  79. 86. <ul><li>&quot; A ccountability isn't hard to define. It's the concept that every individual is responsible for his or her actions, is liable for their consequences, and must answer to someone if these actions harm others ... Of the many shining values that hold together the fabric of civilization - honesty, kindness, truthfulness, generosity, decency - I truly think that accountability may be the greatest of them all. Without it there can be no respect, no trust, no law --- ultimately, no society. </li></ul><ul><li>My job as a police officer is to impose accountability on people who refuse, or have never learned to impose it on themselves...We try to enforce external controls by enforcing the law...But as every cop knows, external controls on people's behavior are less effective than internal controls, such as guilt, shame, embarrassment, fear of punishment, and reluctance to face public condemnation or ostracism. </li></ul><ul><li>The sense of guilt or remorse once associated with the </li></ul><ul><li>commission of a felony has vanished...If we exempt...(the </li></ul><ul><li>criminal...,even partly, from accountability, we become a </li></ul><ul><li>society of endless excuses, where no one is prepared to </li></ul><ul><li>accept responsibility for anything.“… Rueben M. Greenberg </li></ul>
  80. 87. An Ancient Concept...still true … encourage the young men to be self-controlled . In everything set them an example by doing what is good. In your teaching show integrity, seriousness and soundness of speech that cannot be condemned , so that those who oppose you may be ashamed because they have nothing bad to say about us. Titus 2:6-8
  81. 88. “ With self discipline Almost anything is possible.” Teodoro Roosevelt
  82. 89. The world never ceases to turn Remember
  83. 90. Today's bleak outlook may turn into tomorrow's joyous dawn Remember
  84. 92. “ The day may dawn when fair play, love for one’s fellow man, respect for justice and freedom, will enable tormented generations to march forth serene and triumphant from the hideous epoch in which we have to dwell. Meanwhile, never flinch, never weary, never despair.” Winston Churchill Last Commons Speech 1955 &quot;Never Give In&quot;
  85. 93. Darkness need not fall!
  86. 96. THE COMING DAWN <ul><ul><ul><ul><ul><li>A code of ethics </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>that has </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>endured </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>for over </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>3,000 years: </li></ul></ul></ul></ul></ul><ul><li> Walk with integrity </li></ul><ul><ul><li>Do what is right </li></ul></ul><ul><ul><li>Speak the truth from your heart </li></ul></ul><ul><ul><li>Do not slander others </li></ul></ul><ul><ul><li>Do your neighbor no wrong </li></ul></ul><ul><ul><li>Do not spread rumors </li></ul></ul><ul><ul><li>Keep your word...even when it hurts </li></ul></ul><ul><ul><li>Lend money without usury </li></ul></ul><ul><ul><li>Do not accept a bribe </li></ul></ul><ul><ul><li>Despise a vile man </li></ul></ul><ul><ul><li>Honor those who revere God </li></ul></ul><ul><li> by David, King of Israel and Judah </li></ul><ul><li>(adapted from Psalm 15) </li></ul>
  87. 97. Thank You www.jimwes.com Jim

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