FINANCIAL ACCOUNTING AND THE S&L CRISIS
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This research examines the implications for financial accounting and financial reporting that have or are likely to stem from the savings and loan (S&L) crisis. Because of the seriousness of many charges laid against the accounting profession and against individual accounting firms, it might appear that the focus of this research would be only on auditing and reporting practices.1 In fact, however, changes in financial accounting practices for thrift institutions that are not directly related to charges of dereliction or fraud on the part of accountants have also stemmed from the S&L crisis.2 This research, therefore, addresses both types of change. The S&L Crisis The savings and loan crisis was brought into sharp focus for the American people in the summer of 1989, when it had developed to a point where the Bush Administration and the Congress could no longer afford to behave as if the problem did not exist.3 By that time, hundreds of savings and loan associations were either insolvent, or were in danger of becoming insolvent in the relatively near future.4 Knowledgeable sources contended that the thrift industry as a whole was losing between $300 million and $400 million each month. Although the crisis became apparent to the American public in the summer of 1989, it was full blown by that time, having developed into a serious problem by the mid 1980s. The problems being experienced by the thrift industry were attributed to a number of factors
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oitte & Touche in conjunction with a predecessor (Touche Ross) firm's financial accounting work for Westwood Savings and Loan.16 Deloitte & Touche is charged with failure to uncover hidden recourse agreements during 1982 and 1983 unqualified audits of Westwood Savings and Loan. If the FDIC prevails in this action, accounting firms in the future will be required to verify data provided by clients, rather that certifying financial performance and position based on provided data, as well as search for data not known to exist.
7. The FDIC is seeking $50 million in damages from Deloitte & Touche in conjunction with a predecessor (Deloitte, Haskins & Sells) firm's financial accounting work for Commonwealth Federal Savings and Loan, Ft. Lauderdale, Florida.17 Deloitte & Touche is charged with failure to detect and disclose $25 million in losses from unauthorized speculative commodities trading by the treasurer of Commonwealth Federal Savings and Loan. If the FDIC prevails in this action, accounting firms in the future will be required to verify data provided by clients, rather that certifying financial performance and position based on provided data, as well as search for data not known to exist.
8. The FDIC is seeking $38,500 in
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Approximate Word count = 3777
Approximate Pages = 15 (250 words per page)
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