Latest

When Auditors Get Mixed Up In M&A, Smaller Clients Get Hurt

A new study says smaller public companies are paying a premium for the prestige of a Big Four auditor but the auditors are dangling small clients as chum for their large acquisitive shark audit clients.

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The Big 4 And Globalization

More On My Reuters Breakingviews Column: The Andersen Tax Name Grab»

The news that a tax consulting firm made up of ex-Andersen partners would take the Andersen name garnered much media attention, as you might expect. It says something—but maybe not what the firm’s partners think— that so many years after the destruction of Arthur Andersen by criminal indictment—thirteen years—so many people care.

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A China Fraud Dissected: Part 3 AgFeed’s Trusted Advisors Protiviti and Latham & Watkins»

Company executives and directors like to believe they can purchase a posse of “trusted advisors”. Instead, they’ve often only bought a gaggle of self-interested auditors, lawyers, and consultants. But to whom does each of those vendors owe loyalty?

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A China Fraud Dissected: Part 2 AgFeed’s Auditors»

AgFeed had the benefit of two PCAOB registered and inspected audit firms. There is no indication on either the SEC or PCAOB website of an investigation of either for what happened at AgFeed. Is this one going to end badly, too, like the Gately case?

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Where I’ve Been

Speaking Engagements/Conferences»

Next Up: A week in New York, Washington DC and Delaware including a May 2 guest lecture at Baruch College/CUNY, Zicklin School of Business, New York, NY.

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Reminiscing About The First Too Big To Fail Bank – Continental Bank»

There’s a conference planned for next week, May 15, at Gleacher Center in Chicago, “30 Years After the Failure of Continental Illinois Bank: Have We Solved Too Big to Fail?” I wrote about my experience at CINB, my first job, for American Banker back in 2011.

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Guest Lectures At Stanford Graduate School Business»

My notes for guest lectures (there were two sections, back-to-back) February 10, 2014 for Bus F332/Law 725, Finance and Society, at Stanford University Graduate School of Business, taught by Professor Anat Admati. Emphasis: The auditors’ role in corporate governance in financial institutions and specifically how auditors not inadvertently stifle the actual use of compensation clawbacks.

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The Case Against The Auditors

Piling Up For PwC»

Update: The PCAOB is investigating PwC for its tax avoidance advice to Caterpillar, the Wall Street Journal is reporting. One down, more than 100+ PwC audit clients advised via Luxembourg to go…

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18-Year Old Anthony Canalungo Questions Herbalife, And PwC, On Exchange Rates»

Anthony Canalungo wrote a really interesting article about Herbalife’s financials in Venezuela. Three different MLM companies from the peer group in addition to Herbalife operating in Venezuela and all except for Herbalife are using SICAD 2. What else do these four firms have in common? Auditor PwC.

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Auditor Independence: Another Case of Misplaced Loyalty»

Ryan Adams testified on behalf of PwC in an important court case. How can PwC be independent of Adam’s employer Marin Software, and Adams, the Financial Reporting Director at this newly public PwC-audited client company, if he’s testifying on PwC’s behalf in litigation that could impact PwC’s business model in California and, perhaps, nationally?

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Your Career

PwC Settles Campbell Overtime Case; Impact To Profession Is Happening Now»

PwC recently agreed to settle the Campbell v. PwC overtime class action lawsuit pending in California. I first wrote about the case on October 25, 2007. Here’s an excerpt from my wrap-up at Medium.com.

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The Saga Of Stephen Glass: A Guest Post Morality Tale From Eric Starkman»

Is it fair to “tar and feather” professionals when they are sued or only when they are convicted of crimes? How much time must pass before they can get on with their lives?

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Madoff, MLK, Buddha And Elusive Nature of Self-Interest»

Your first obligation as a professional is to your client, not your firm, your partners, or even your family.

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The Big 4 And Consulting

“Tax Avoidance On An Industrial Scale” Says British MP About PwC’s Luxembourg Work For AIG And Others»

British MP Margaret Hodge grilled Kevin Nicholson, of PwC’s UK tax practice, in a Parliament Public Accounts Committee hearing on Monday. You know you’re on your “back foot” when the first thing out of your mouth has to be a denial that you lied under oath. More details about PwC’s tax avoidance scheme for audit client and US government owned AIG.

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Luxembourg Tax Leaks Put PwC On The Defensive»

My latest column at Medium.com responds to PwC’s #LuxLeaks defenses: Illegal docs, legal advice. I also raise the obvious auditor independence issues which no one else is reporting.

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PwC Put Guy Who Whitewashed For Bank In Partner Spot»

The NYDFS PwC investigation discovered several emails that Benjamin Lawsky, the Superintendent of Financial Services for New York, characterized Monday as examples of a consultant going along with a “whitewash”.

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Writing for Others

Duped By Fake Documents? All In A Day’s Work For Some Journalists»

I could not resist writing at Medium.com about the teen trader who recently duped a journalist from New York magazine into believing he had made $72 million trading gold and other alternative assets. It’s not like auditors don’t get fooled every day by fake documents.

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Update: The Shoemaker’s Children… The Big Four And Their Own Broker-Dealers»

Did you know that each of the Big Four audit firms and some of the next tier also run SEC-registered broker-dealers? You’ll never guess who audits them.

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McKenna At Medium: Two New Columns For the Bull Market Collection»

I’m part of a group effort at Medium.com called “Bull Market”. The first two columns are about taxes—the inversionist avoidance kind and one corporation’s horrible allergy to them.

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You Can Quote Me On That

New At Forbes Online: The Precarious Financial Position Of The New York Times»

Update: This column was linked to by the NYT Public Editor! I published some New York Times numbers over at Forbes.com, “Time Is Running Short For The New York Times”, in anticipation of the company’s 3Q earnings announcement on October 30.

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The Full Service Firm: McKenna Comments For Canada’s The Bottom Line On Legal Services»

I’m quoted extensively in an October 2014 The Bottom Line piece on the Big Four expansion into full-fledged legal services.

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SEC’s Final Pay Rules Coming Any Day: Will They Be Enough To Level Playing Field?»

Senator Robert Menéndez [D-NJ], author of the Dodd-Frank pay ratio disclosure rule, didn’t take “not yet” for an answer when SEC Chair Mary Jo White testified before the Senate Banking Committee in late July a year ago. Menendez told White: “I’ve been waiting for several years now.” (Me, too!)

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Food for Thought

Deloitte US First Female CEO; There’s More We Don’t Know»

Wouldn’t it be nice if investors and other interested parties could look up new Deloitte US CEO Cathy Engelbert in a public and easily accessible registry and find out about all the audit clients where she has been a lead partner or a Quality Control partner? Has she ever been named in a lawsuit or been sanctioned? Let’s hope not.

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Journalists’ Obligations In The Shareholder Value Maximization Debate»

I wrote about two journalists who penned sympathetic stories about shareholders and other stakeholders who can’t get their voices heard but who, in service to shorter and simpler narratives, paid short shrift to the active and contentious debate about shareholder primacy and shareholder value maximization.

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Auditors Can Be Whistleblowers: A Guest Post On Recent Developments In Whistleblower Case Law»

Several recent developments regarding auditor whistleblowers should be of interest to internal and external auditors and compliance professionals, whether they work for a public company or a professional services provider.

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