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CEO Daily Brief – Dec. 20, 2010

New York Authorities to Allege Ernst & Young Stood By as Lehman Mislead Investors: News Report New York authorities may …

New York Authorities to Allege Ernst & Young Stood By as Lehman Mislead Investors: News Report

New York authorities may be preparing to file civil charges against accounting giant Ernst & Young for its alleged role in the events which led to the collapse of the once powerful Lehman Brothers, according to a report from The Wall Street Journal.

The Journal reports the accounting firm stood by while Lehman misled investors about its finances. Citing unnamed sources, The Journal reports that New York Attorney General Andrew Cuomo may file the case as early as this week.

It is possible that Ernst & Young will try to settle the case before any suit is filed, according to The Journal.

The possible charges illustrate how important it is for accounting firms to keep their professional independence from the companies which they audit. Otherwise, both the accounting firm and the business client could eventually face legal action or fines from the government.

Ernst & Young earned approximately $100 million for auditing Lehman Brothers between 2001 and 2008, The Journal reports. The state could try to fine Ernst & Young.

The investigation by Cuomo, who will soon be sworn in as New York governor, appears to be part of a broader inquiry into whether banks misled investors by removing debt from balance sheets before reporting financial results, according to The Journal.

For more about Cuomo’s investigation into Ernst & Young, as reported by The Wall Street Journal, please click here.

Online Ads Pull Ahead of Newspapers

CEOs of companies trying to target customers are growing increasingly aware of the presence of Internet ads versus the ones appearing in printed newspapers.

Advertisers spent more on Internet ads than on print newspaper ads for the first time since the creation of the Internet, The Wall Street Journal reports. Citing estimates from eMarketer, The Journal reports that U.S. spending on online ads will total $25.8 billion, more than the $22.8 billion spent on print ads in newspapers.

The higher amounts spent on online media illustrates how consumers have moved to the Internet.

“It’s something we’ve seen coming for a long time, but this is a tipping point,” Geoff Ramsey, CEO of eMarketer, told The Journal.

In addition, Forrester Research says that U.S. consumers spent as much time online as they did watching TV. There is less time spent listening to the radio or reading printed versions of newspapers and magazines, Forrester adds.

Total U.S. ad spending is expected to increase 3 percent in 2010 to $168.5 billion. eMarketer estimates spending on print ads in newspapers will drop 8.2 percent in 2010, and a 6 percent decline is expected in 2011.

For more about advertising in newspapers versus online, as reported by The Wall Street Journal, please click here.

Outsourcing Heads Back to United States from Overseas to Rural America

U.S. companies may be changing how they outsource work to overseas locations. Outsourcing to the rural United States is a growing trend for bigger businesses in America. Most rural outsourcing is related to computer code and IT support sectors, according to Entrepreneur magazine.

So far, companies taking advantage of rural outsourcing have been large. For example, Rural Sourcing Inc., estimates that only a quarter of its business comes from smaller companies.

But there is a possible market from smaller companies. Small-business owners may be less hesitant to store computer codes or financial data with a U.S. outsourcer than one located outside of the United States, according to the magazine. Rural outsourcers can charge as much as 70 percent less than similar firms in big U.S. cities. Competitors in foreign countries may still offer lower prices but rural outsourcers in the United States are much closer to the business’s headquarters, which can be a draw for small U.S.-based businesses.

There are only about 20 rural outsourcers throughout the United States. They face many challenges in running their business. But that number may increase as it becomes a growing option for smaller businesses located in the United States.

For more about rural outsourcing from Entrepreneur magazine, please click here.

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