The Big 4 And Globalization

When I ask, “Where were the auditors?” and decry the fact that “they weren’t there,” it’s not due to some unreasonable, unfair focus on the most milquetoast of potential culprits. I bang this drum because the auditors should have been there, as a last stop, where the buck should have stopped, as gatekeepers, watchdogs, advocates, and the last bastion of standards and expected values shareholders can look to.
But they weren’t.

When each of the notorious “financial crisis” institutions collapsed, were bailed out/nationalized by their governments or were acquired/rescued by “healthier” institutions, they were all carrying in their wallets non-qualified, clean opinions on their financial statements from their auditors.

Given the pressures on costs and the longstanding ties some finance, audit, and accounting executives have with the accounting firms, it is not surprising that the weakening of the independence commitment may come from the companies themselves. What’s the downside for them? The potential for scrutiny by corporate governance experts and journalists? You can’t argue with a recession. And in the event of an accounting scandal or restatement, plaintiff’s lawyers will have an uphill battle to penetrate the impenetrable auditor liability shields and caps.

What’s lost in all of this discussion of efficiency and cost cutting?

Independence protects shareholder’s interests.

You Can Quote Me On That

Alex Howard’s story discusses the impact of the Supreme Court case re: the PCOAB on IT compliance. Article contains several quotes from me and the rest of the great story, including tons of resources to catch up on this issue .

“Francine McKenna, a sharp-eyed observer of Big Four machinations on her re: The Auditorsblog site, offered a trans-Atlantic view of the deal: “With everything going on here, Deloitte is probably in the worst shape of the Big Four. Deloitte lost the most clients through failures and bailouts and are really hurting, with people being laid off [...]

Francine McKenna, an ex-PWC director and a fierce critic of the “big four” accounting firms (PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young), believes the Satyam issue raises fundamental questions of oversight. She says: “It’s hard to know the extent to which there was complicity between the auditors and senior management or whether it was plain [...]

Your Career

Somehow, they manage to make accounting look sexy. It starts when they roll into campus career fairs with their nicely tailored suits, bundles of pens and tote bags to give away, even informational cards which can be planted in a pot and sprout as flowers. You’re not in Kansas anymore! This is the big leagues, and guess what? You made it!

Deloitte should be careful what they wish for. The Flanagan insider trading litigation has forced them to reveal their woefully inadequate policies and procedures regarding independence compliance. While trying to placate their clients who were dragged through the mud on this and exact revenge against their own leadership-level partner, a pillar of the Chicago social and philanthropic community, they’ve admitted to allowing Flanagan to breach their standards more than 300 times and to get away with it.

Professor David Albrecht writes: If you don’t yet spend much time reading blogs, I recommend that you start. I think many blogs are good enough to merit required reading status in your courses.

Where I've Been

I often forget that not everyone who reads my posts also follows me every day on Twitter. I often Tweet breaking news, my reviews and intermittent musing on the days (and often the evening’s) events. Even if I am not posting on this site, I am always working in the background. I was fortunate to be mentioned kindly in two different blogs recently.

Time to get back in the game after a fairly quiet, low-key holiday period. However, much has been going on behind the scenes at re: The Auditors HQ…

Save the date. I have been invited to speak at the 50th Annual IIA Chicago Chapter Annual Seminar, April 19th, 2010.

Writing for Others

My new post is up @Going Concern.
Davos is a big deal for the media and they’re hungry for content. Any content. The prepped and pre-scripted interviews are full of softball questions and carefully restrained probing. Whether giving air time to KPMG’s Flynn, Quigley from Deloitte, E&Y’s Turley or PwC’s Nally, everyone sticks strictly to their assigned [...]

My new post is up @Going Concern.
“I chafe at the cheekiness of some of the announcements. The firms’ communications teams are blithely unaware of how such shameless self-promotion looks to those who are watching closely. For example, all of the Big 4 firms were named to the Fortune 100 Best Places To Work list, even [...]

My new post is up @Going Concern.
“It’s that time of year for audit and tax professionals – busy season. Do you know where your backbone is?Picture the scene so many have you have described to me in delicious detail. A manager, or a senior associate toadie, cracks the whip until late in the evening on [...]

The Case Against The Auditors

My objective in writing this story was to handily contradict the self-serving defense to the fraud at Koss that’s being served up by Grant Thornton and supported by some commentators. But punching holes in their Swiss-cheese defense is like shooting fish in a barrel.

The SEC held a news conference to announce several changes and initiatives in their Enforcement Division. Afterward I joined a few select bloggers invited to a special briefing with Robert Khuzami, the Director of the Division of Enforcement.

It’s my contention that the Big 4 and their partners are still pretty lucky, continuing to dodge any truly deadly SEC enforcement bullets.

The SEC accused Ernst & Young of issuing unqualified audit opinions that said that Bally’s 2001 and 2003 financial statements conformed with U.S. accounting rules. Six of the Ernst & Young’s current and former partners agreed to settle SEC accounting violation charges as part of this investigation.at least two of the EY partners charged, Fletchall and Sever, held leadership positions with the AICPA in the past.

Food for Thought

We appreciate your interest in the work of the PCAOB.

The Top Searches over the holidays. Any doubt what readers are worried about?

re: The Auditors was named one of the best business blogs of 2009 by Business Pundit.

The Big 4 And Consulting

My friend Roopen Roy’s most recent column for MyDigitalFC.com is entitled, “Why Mergers In FirmsFall Apart.” Roopen Roy is the Managing Director, Deloitte Consulting, India.

Sarbanes-Oxley (SOx) made law what is best practice for all public companies or companies that issue public debt. That includes “smaller” companies.

I think about the “one-firm firm” concept frequently. It’s an ideal that I can safely say all the Big 4 audit firms aspire to. And David Maister was the guru when I started in consulting in 1993 at KPMG Consulting. Later my mentor gave me his book, Managing Professional Services Firms, and I was hooked on the theory of professional services as well as the practice. So much has changed even in my professional life, which only goes back to the early 80’s. Front and center are the threats to the global network of all the firms and the focus on aggressive growth while diluting the partnership culture of the firms by perverting their compensation structure. Partner performance assessment has become a short-term, self-serving tool to throw disproportionate wealth to a small group of senior leadership.