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I'm not 100% sure this is what's happening, but thought I'd share my experience: I used to work at a hedge fund that sometimes held stakes in private companies.
by lquist 11y ago
I'm not 100% sure this is what's happening, but thought I'd share my experience: I used to work at a hedge fund that sometimes held stakes in private companies. Every year, we would have to mark the stakes to market. However, we could not do the valuation ourselves; the valuation was done by 3rd party auditors. And these 3rd party auditors usually have no idea what they are doing. Even if they are Big 4 auditors and the stakes are large :/
- jsprogrammer 11y agoWhy would a hedge fund hire auditors who don't have any idea what they are doing?
- freehunter 11y agoWelcome to the world of auditing. You hire an auditing company that knows a lot, and they send you their newbies.
- harry8 11y agoAnd you manipulate them by hiring the same auditing firm for consulting and ramp up the pressure when it comes time for them to give an unqualified opinion. Those newbies and the audit partner will be crushed by the avarice of the other partners selling consulting services. Work they would not get if they were not the audit firm. Whether it's legal or not it is corruption and makes a good case for regulation. If you audit a firm, the audit firm and its related entities cannot sell anything else to that firm and its related entities. Is it likely? Well who would lobby for it? Who would lobby against it? How much are they willing to spend. Democracy.
- owenversteeg 11y agoThere are four audit companies -- PwC, Deloitte, EY, and KPMG -- that together audit 99% of companies in the FTSE 100. If you don't hire them, you get looked at funny. https://en.wikipedia.org/wiki/Big_Four_%28audit_firms%29 https://en.wikipedia.org/wiki/Big_Four_%28audit_firms%29
- lquist 11y agoThis was a large hedge fund and the auditors were name brand auditors. They still had no idea what they were doing :/
- boomzilla 11y agoI think you misunderstand the purposes of auditing. They have very strict accounting that they have to follow. There is a degree of "interpretation" on what numbers can be assigned to certain items, but by and large, they just follow a big book of rules. Of course there are certain new business practices that are not reflected fairly and properly by these rules, but that should be the exception, not the norm.
- justincormack 11y agoWith hedge funds it should be mark to market, not use the big book of rules, as these are available to trade securities. Marking them down would seem correct given the current market situation, depending on what other information there is about trades and offers.
- medius 11y agoYes, but is it better or worse than values assigned to companies during various funding rounds?