A report from the Institute of Accounting and Auditing (IAA) reveals that the accounting firm Deloitte supported Bankia's IPO, although it knew that the nationalized Spanish bank was technically operating at a loss or with the narrowest of profit margins.
The document highlights two serious infractions that will affect Deloitte and firm employee Francisco Celma, possibly leading to both the company and Celma losing their business licenses. This would leave half of the companies listed on the Ibex without an accounting auditor.
The story will undoubtedly damage Deloitte's reputation. The firm looked at Bankia's books without any outside opinions and issued a careless yet favorable assessment of the bank, which was one its best clients. The IAA should punish behavior like this in order to ensure that accounting firms offer the public truthful and rigorous valuations of companies at all times.
