The Big 4 And Globalization

The SEC did not issue a press release for this rule. Chairman Shapiro did not mention it in her July 27 speech that discussed actions the SEC was taking in response to the passage of the financial regulatory reform bill. It was not an explicit requirement of the Supreme Court decision regarding the PCAOB.

So where did it come from?

Why is it necessary?

What we have here, in my opinion, is a clear and obvious attempt by the SEC to placate the largest registered firms, the ones who still strongly resent being under the thumb of an “independent” rather than a peer regulator.

If any doubts remained that PricewaterhouseCoopers International Limited, the international global network “coordinating” firm, does the bidding of its largest and most powerful member firms – primarily PwC US and PwC UK – the latest “restructuring” in India should dispel them. PwC US and PwC UK want to be closer to their money.

The Supreme Court will hand down their decision on Free Enterprise Fund v. PCAOB before on June 28th. Congressional action may be necessary to reestablish the PCAOB or a comparable regulatory authority within the SEC, if we want to continue independent regulation of the audit firms. I have some recommendations for a new PCOAB law.

You Can Quote Me On That

Dean Starkman edits The Audit, a critique of the business press at the Columbia Journalism Review.
I had the good fortune to be cited recently – it’s the fourth time if you’re keeping count – by The Audit and Starkman for my coverage of KPMG’s settlements of their Countrywide and New Century litigation.
Speaking of accounting—Re: The [...]

The SEC’s charges against Deloitte’s former Vice Chairman Tom Flanagan were settled on August 4th.  The complaint, filed in a District Court in Chicago where Mr. Flanagan resides, details what the SEC could prove, within a reasonable amount of time.  There were many more instances of illegal and unethical activity alleged by Deloitte in their [...]

There’s a great new update on the story of PwC’s cuts of more than 500 internal IT professionals in the Florida and Atlanta markets. It was written by Jeff Harrington at the St. Petersburg Times on Sunday August 8th.  Harrington focuses primarily on the local impact of the cuts. He finds evidence that PwC promised [...]

Your Career

This post originally appeared at GoingConcern.com on August 26, 2009.
I’ve added updates and additions where available.
Insider trading. Fraud. Money laundering. Falsifying documents. Embezzlement. Tax shelter abuses.
Some say I’m too negative about the audit industry. Occasionally I’m accused of making things up.
Ha.
Not only is everything I tell you true, but the truth of what these [...]

…there’s definitely collusion/shenanigans going on amongst the big 4 for compensation along with extending dates for promotions. Ratings manipulation is also going on along with unfair treatment of those that tried to go above and beyond….”
Both Deloitte and KPMG admitted last fall that job cuts were made for economic reasons, removing the taint of “performance [...]

The graduation party’s come and gone. There’s a Mont Blanc in your limited edition Prada backpack. The economy is not getting any better, but friends, relatives coughed up decent cash and you headed to Barcelona and Bilbao with a few buds to check out the Gehry Guggenheim. Your start date is delayed until January and the offer letter has [...]

Where I've Been

You can read my stories here. This fall you can also see me talk about these stories live. And you can support my coverage of key conferences that will produce new stories about the audit firms and accounting profession.

I have been invited to speak September 10 and 11 at the West Florida (Tampa) ISACA Chapter’s Fall Seminar. I will be leading an extensive program covering several topics for a total of 7+ hours of CPE.
For more information and to register, go here.
Agenda:
Friday Full Day
Conversations Rule Part I: Employees Are Driving Your Company’s Brand And [...]

I have been asked to participate on September 15, 2010, 6-9 pm in New York City (14 Vesey Street, 2nd Floor Auditorium) on a panel to discuss, A Crisis of Our Own Design, with Floyd Norris, Chief Financial Correspondent, New York Times and Anton Valukas, Lehman Bankruptcy Examiner, Chairman, Jenner & Block.
The program is sponsored by the NYCLA [...]

Writing for Others

I made another guest post at the blog for Financial Executives International.  My BBF (best blogger girlfriend) Edith Orenstein is on vacation.  The post is cross-posted over at accountingWEB, because Edith is so good and so popular.  She’s been my go-to girl for a while when it comes to technical accounting support and general navigation [...]

On Thursday August 5th, I covered the PCAOB’s Open Meeting and wrote up a report for the FEI Blog. I’d like to make a few more comments about the meeting yesterday.

I was both surprised and very pleased when Chairman Goelzer announced that he’ll request Congress to amend Sarbanes-Oxley to open the PCAOB’s disciplinary proceedings to public view, in line with the SEC. I was also gratified. I made this suggestion and many times have pointed out the challenge to investors’ right to know about an important gatekeeper – the auditors.

My new column is up @Going_Concern:
Be very wary if asked to participate in a pre-inspection file review and you’re asked to add evidence of reviews and signoffs, insert documents after the fact, change conclusions or recreate analyses.
Last week Going Concern reported the latest findings of the UK version of the PCAOB, the Audit Inspection Unit. There [...]

The Case Against The Auditors

It’s no coincidence that settlements were announced less than a week apart for both New Century and Countrywide. As two of the earliest subprime failures, all parties were probably anxious to clear some clutter and make room for other matters. But with no trials, the truth about KPMG’s role in both Countrywide and New Century will be buried.

How many others of the financial crisis bankruptcies, bailouts, takeovers and nationalizations were the subject of a bankruptcy examiner’s report, complete with juicy details about the auditors’ role?

None.
But now there’s Washington Mutual.

Leaders of public companies, like policemen or firemen that do a job for money, also sign up for a public duty. As stewards of a public company, the CEO and CFO’s job is not a reward for years of service, an entitlement after achieving career objectives but a responsibility and honor that should be earned every day by setting an example for all those who work under them.

The auditors serve the role of independent watchdog, guardian of shareholders’ interests in the capital markets. Their relationship to management should be adversarial – not friendly, cozy and comfortable. They are hired and fired by the Board, also supposedly independent. Given the way auditors are compensated, directly by the companies they judge, they have a very difficult job. Regulators are there to guard the guardians and are supposed to make sure they’re doing that job.

In the latest scandal at AIG, we’ve seen PwC and AIG’s most senior executives, former CEO Sullivan and CFO Bensinger, attempt to divert attention from their failures. PwC wants to have their cake and eat it too. They initially claimed to have been duped by AIG management including Cassano but now take credit as heroes for eventually forcing AIG to disclose a material weakness in the valuation process. Isn’t it about time to call a spade a spade?

Food for Thought

I’m writing about once a month for a journal of friends called Sundayed. It gives me a chance to stretch my wings and write about topics other than the accounting industry.
I hope you’ll take a look.
“…I attribute much of what I’ve accomplished to measurement, first and foremost.  I’ve used Statcounter.com as a primary metrics tool since [...]

Call me incredulous, but the Big 4’s public relations professionals may be on to something. Set the bar low, tell us what the Big 4 can’t do, won’t do, want to make you believe they have no responsibility to do, and maybe everyone will leave them alone. Then they can go back to making money [...]

Startups, especially on the West Coast, are usually full of folks who’ve been involved in more than one. Sometimes that’s due to success – the company is acquired – and sometimes that’s because of failure. Startup junkies are always moving. The Zynga management team includes several alumni, including their CEO and CFO, of SupportSoft.
SupportSoft’s founder who is the current Zynga CEO, and Zynga’s CFO, have been out of SupportSoft for a while. Within five minutes I knew why. SupportSoft settled a class action law suit in 2007 for $10.7 million that alleged its then-CEO and CFO, Radha Basu and Brian Beattie, violated federal securities laws. They were accused of making false and misleading statements about the reasons for record revenues, resulting in the artificial inflation of the company’s stock price.

The Big 4 And Consulting

Protiviti is currently soliciting feedback for its new Sarbanes-Oxley Insight Survey.

The results of this survey promise to provide valuable and important insight into the current state of Sarbanes-Oxley compliance for all types of organizations.

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.