The Big 4 And Globalization

How Satyam Supported PwC’s Schizophrenic Strategy To Reenter The Systems Integration Business»

Independence is one of the most important concepts a public accountant must grapple with. Before the technical standards, before the decisions about classification of transactions, before the methodologies, checklists, and workpapers, before any mechanical pencils are pumped with lead, one must decide whether to accept the client, and every subsequent engagement for that client, based on the codified standards for independence and objectivity, as well as one’s appetite for risk…To reenter the systems integration business, PwC had to find a way around their own weakness in technology leadership, lack of experienced resources, and the constraints of the IBM non-compete agreement.

Enter Satyam.

It’s A Race To The Finish - But There Are No Winners»

Not so long ago, Dennis Howlett and I went public with a bet:

Which Big 4 audit firm is the next to fail?

Dennis believes that I’m betting on PwC as next to fail. I don’t honestly remember committing to that, but I’m willing to go with it for the sake of argument. This is in spite of the fact that the other Big 4 have plenty to worry about and the next tier firms are in no way ready for prime time.

GM Better Off Bankrupt? A Rebuttal From Ron Silberstein»

A discussion with Ron Silberstein was the inspiration for my previous post on the question of a GM bankruptcy. Now he’s written a rebuttal. It’s reprinted here, in its entirety.

The Big 4 - The World Is Too Much With Them»

Getting and spending, we lay waste our powers;
Little we see in Nature that is ours;

You Can Quote Me On That

If the New Century trustee is successful, ”it may embolden others to look more closely at the possibility of bringing [accounting] firms to some level of culpability for the things that happened,” that led to the credit crisis, Francine McKenna, president of McKenna Partners LLC, a corporate-governance consultancy, said in an interview with the Wall Street Journal’s Donna Kardos, April 2, 2009.

For the link to Wall Street Journal story, go here.

For the link to my post on the lawsuits filed by the New Century bankruptcy trustee against KPMG LLP and KPMG International, go here.

“Long projects can indicate unclear goals, out-of-control requirements, and inconsistent government oversight. Without proper monitoring, external vendors can make a killing on extended projects. California must diligently manage these risks.” ZDNet IT Project Failures Column, Mike Krigsman, February 19, 2009

Link to this story on Duration reporting in California’s IT strategic plan

More quotes in ZDNet here, here, and here.

…existing disclosures under FAS 5 ‘‘downright hide, obfuscate, and thumb their noses at the need for investors to know what’s going to happen to their investment.’’ BNA Accounting Policy and Practice Report, Vol. 4, No. 17, August 2008.

Link to information about this BNA report.
Link to my story and more on FAS 5 here and here.

“…some firms have used their interpretation of the law as a club against their clients.…winning a significant portion of Boeing’s internal audit contract, worth millions, was a major triumph for PricewaterhouseCoopers in 2006.”

Link to Seattle Post-Intelligencer story
Link to my story re: Boeing, Sarbanes-Oxley

“Companies will need a lot of consulting help to implement XBRL and incorporate into the new Reg FD [fair disclosure rules] suggestions to do more with their websites and investor relations blogs.” Financial Times, August 19, 2008 in reference to SEC’s unveiling Interactive Data Electronic Applications (Idea).

Link to Financial Times story
Link to my story on SEC Web 2.0 initiatives.

Your Career

Careers in Uncertainty - McKenna Speaks At Maryland CPAs Business Expo»

I had the pleasure of participating in the Maryland Association of CPAs Business Expo this past week. In addition to moderating a panel on regulatory reform and participating in another on accountants use of socal media tools, I gave a presentation:

Managing Your Career: Turning Uncertainty Into Opportunity

Do As I Say, Not As I Do - Whistleblowers In The Big 4»

I thought it would be interesting to look at how the Big 4 firms address their own internal ethics and compliance issues in the BRIC countries, in particular. I was especially interested in the availability of ethics/independence hot lines in these countries. Given the experience of Satyam and PwC in India, you have to wonder whether anyone on the PwC audit team suspected any inappropriate activities by the client management, the PwC partners now accused of allowing the alleged improprieties to occur, or both. If anyone had seen or heard any wrongdoing, could they have reported ethics, independence, or risk and quality concerns to anyone locally or internationally without risking retaliation or worse?

Auditor Haiku - Who Said Accountants Weren’t Creative?»

The contributions to the impromptu haiku contest, inspired by gogo Inflight and their offer of a free hour of inflight wifi to SOBCon attendees, have been AMAZING! I am now sure there are some hidden poets, fiction writers, and essayists, as well as a few more bloggers, amongst my readers. Glad to have inspired you to think in a different structural form, for a few moments at least.

So You Want to Be A Government Auditor…»

My friend and former colleague, Richard Chambers, is now the President of the Institute of Internal Auditors. Richard has a lifetime of internal audit experience and is my go-to-guy when it comes to the fine points of the internal auditing career. He’s now writing a blog for the IIA and his latest post touches on the challenges of being a government auditor.

“…with an alarming frequency, it seems that some of our colleagues who audit local government operations are waging an uphill battle against formidable political forces.

Where I've Been

Accountants And Social Media Dream Panel @MDBIZEXPO»

I had the very good fortune of being invited to participate in a dream panel at the Maryland Association of CPAs Business Expo last week. The panel was moderated by Bill Sullivan of the MACPAs and included Edith Orenstein of FEI, Will Burns of the Maryland Chamber of Commerce, Alexandra DeFelice of the Journal of Accountancy, and Rick Telberg of CPA Trendlines.

A lot has changed, except for the Big 4, since I wrote this post.

Where I’ll Be: Compliance Week Annual Conference Starts June 3»

For the third year in a row, I’ll be covering the Compliance Week Annual Conference held at the Mayflower Hotel June 3-5, 2009, Washington DC. To see what kind of trouble I can stir up, just look at my coverage last year.

This year promises to be just as stimulating.

New York, New York, New York»

If you follow my Twitter stream (…you should, it’s available in an RSS Feed, too!) you know that I was in NYC last weekend. It was fun but also a little of business.

Writing for Others

McKenna Featured @Clusterstock.com»

I was asked by the infamous John Carney to fill in at Clusterstock.com while he’s roaming the Midwest in search of “Baseball, Hot Dogs, Apple Pie and Chevrolet…”

Arthur Levitt Should Just Shut Up About AIG»

My new piece is up at The Huffington Post. It should be read alongside yesterday’s story on Lynn Turner. If these two start selling out the shareholder and the ideals of the accounting profession in all of the mess of the financial crisis, who’s left?

Experts in the Industry: Francine McKenna (50 of 45)»

“One of the things I love about my friend, Francine McKenna, author of re: The Auditors, Using the Tools Instead of the Tools Using Me, is that she comes from “outside” the industry…Oh yeah, she also has a delicious sense of humor. Get ready to see it in action as she answers the five questions from the Experts [...]

The Case Against The Auditors

BDO International: “Manage and Control” Means Slam Dunk For BES»

After a week’s delay, the Banco Espirito Santo (aka ES Bankest ) vs. BDO International trial finally started in Miami on June 2. I was approached by Courtroom View Network and given access to the full trial tapes and select clips in exchange for this mention.

I’ve been following Stephen Thomas of Thomas Alexander & Forrester in the BDO International case and in his new initiative regarding KPMG International and New Century. He’s on a roll. And I personally believe he’s got a slam dunk case against BDO International.

Full Coverage of Banco Espirito vs BDO International Here»

The Banco Espirito v BDO International trial is scheduled to take place in the 11th Judicial Circuit of Florida, Miami-Dade County, before Honorable John Schlesinger beginning on May 26, 2009.

re: The Auditors will be following this coverage and providing commentary and selected video clips, including evidence presented, starting on Wednesday, May 27th.

From Courtroom TV’s Press Release:

This trial will determine whether BDO Seidman was an agent of BDO International, thus making the international accounting network potentially liable for a $500M+ judgment against US network member BDO Seidman.

Auditors Not Trying To Wiggle Off The Hook. Really.»

Leading accountants will meet the Government this week to plead for protection as they prepare for a surge in litigation from investors trying to recover their losses from big company failures.The Big Four — Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC) — are braced for an increase in legal action from investors and liquidators as the economic crisis continues.

They have got to be kidding…

KPMG Has A $1 Billion New Century Problem»

KPMG is being sued for $1bn by the liquidators of New Century, the collapsed subprime lender, in the first big case against an auditor arising from the current financial crisis. If the New Century trustee is successful, “it may embolden others to look more closely at the possibility of bringing [accounting] firms to some level of culpability for the things that happened,” that led to the credit crisis, Francine McKenna, president of McKenna Partners LLC, a corporate-governance consultancy, said in an interview in the Wall Street Journal.

Food for Thought

Taking Your Pulse

Wednesday 6/26, Between 10-Midnight CST

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Any doubt what my readers are worried about?

Photo Source

Securities Docket hosted a webcast today, 2/24 entitled, “Liability of Professionals in the Financial Crisis” featuring Stuart Grant and Michael Young. Here are the slides.  Replays available at the Securities Docket site.

The Big 4 And Consulting

Is A Big 4 Firm Buying BearingPoint?»

Update: March 24, 2009
Looks like I was right. Twice. See new comments posted overnight for more details and a copy of the email that went out to PwC employees announcing the deal.
Today’s Washington Post:

Consulting firm BearingPointappears to be near its end.

The company, which filed for bankruptcy protection last month, said late last night that it had reached an agreement with several parties — including PricewaterhouseCoopers and Deloitte — to sell “substantially all of its businesses.”

The Auditors’ Chinese Wall - Is SOx Still A Keystone?»

When the Sarbanes-Oxley Act was passed in the summer of 2002, largely as a rushed reaction to Enron, it did get a few key things right. We can’t allow time, or fuzzy academics, to let us forget the good reasons for having made them.

BearingPoint - An Era Ends, For Now»

Many of you know I have a long and strong connection with BearingPoint. So it was with great regret that I Tweeted early this morning that they have filed for Chapter 11 bankruptcy protection.

Is a Big 4 Firm Buying BearingPoint?»

I’m hearing that either someone buys BearingPoint soon or they’re going bankrupt.

Where In The World Is The Revenue?»

The days of audit as a commodity during the heyday of the firms’ consulting growth during the late 1990s-early 200X years were over…