Why The Big 4 Also Deserve Blame For The "Financial Crisis"

By • Nov 5th, 2008 • Category: Pure Content


Back in November 2007, I wrote a post entitled, “Do You Believe In Santa Claus – The Auditors and The Subprime Crisis.”


Since then, the “subprime crisis” has morphed into the “financial crisis”, the “credit crisis,” and the “the worst financial crisis since the Great Depression and the worst US recession in decades…”
“…PwC is auditor of Freddie Mac and now the behemoth banks JP Morgan Chase and Bank of America, as well as Goldman Sachs and Northern Rock. PwC hasn’t either adequate or qualified staff for their current responsibilities let alone more of the same. Neither has it proven it has the moral right to take on more such work….”

Consider this…

The American Bankers Association has data available for the top US Bank Holding Companies by Assets.  Data was compiled independently identifying the auditors of the Top US Bank Holding Companies both by number of banks audited and total assets audited. This data shows the following:

2007 by number of bank audit clients – 122 companies
KPMG –  33%
EY –  27 %
PwC –  19%
Deloitte – 14% 
All others  – 7% 
2007 by Assets:
KPMG 39% (Citigroup is biggest client)
PwC –  30% (Percentage higher on this basis primarily because two of their clients are JPM Chase and Bank of America.) 
EY – 18%
Deloitte –  11%
All others –  1% 
In 2008, pre-crisis and before the major acquisitions by JPM Chase (Bear Stearns and WAMU) and Bank of America (Merrill Lynch and Countrywide):
2008 by number of bank audit clients ( 121 banks) 
KPMG –  35% 
EY –  25%
PwC –  17% (-3) 
Deloitte – 14%
All other –  10% 
By assets:
KPMG –  43%
PwC –  29%
EY –  16%
Deloitte –  12%    
All other  – 1% 
Data for the Securities Industry and Financial Markets Association (SIFMA) gives us information on the Top 100 securities industry firms – brokerage, investment bank, private equity, hedge fund and clearing house firms –  in their membership.  Data regarding their auditors was compiled independently.
Top 100 Firms SIFMA 2006 
EY –  28%
KPMG –  25%
Deloitte –  21% 
PwC –  20 %
All Other –  6

SIFMA 2007 
KPMG – 27%
EY – 26%
Deloitte – 18%
PwC – 18%
All Others –  11% 
As you can see, PwC is in third place by number of large banks audited for 2007 and 2008 and in fourth place for number of top securities industry firms audited in 2006 and 2007.  
How does an audit firm like PwC, one that’s really not a player, a dominant financial services industry expert in the past, become the dominant auditor for the industry post-crisis?  By default, with the acquisitions of JPM Chase and Bank of America, and by design, with their close relationship with Goldman Sachs as both an audit client since their IPO and as the source of the current administration’s Treasury toadies.  
On an anecdotal basis, I can also say that a quick survey of the Big 4 competitive position in the Chicago financial services market is telling.  PwC’s complete lack of financial services audit presence is an example of how bereft they are both critical mass in terms of financial services experience and significant industry credentials.
ABN AMRO was audited by Deloitte when they bought Chicago’s LaSalle Bank.  PwC had significant consulting work at LaSalle but it was focused on Anti-Money Laundering type work. Very provincial, compliance-type work.
I’ve written about the impact of the purchase of ABN AMRO by the consortium.  Barclay’s, another PwC audit client was in the running to acquire ABN AMRO, but the winners were eventually Fortis, Santander and RBS.  PwC is only 1/4th of that equation, so they lost on bulking up at that point.  Barclays has since said they need money from Abu Dhabi to stave collapse and nationalization given their precarious capital position.  Add Northern Rock’s issues to the mix and PwC’s UK banks don’t make for a good advertisement for PwC’s prowess in the sector abroad either.
The only other significant independent bank headquartered in Chicago, The Northern Trust, is audited by KPMG.
The Chicago Mercantile Exchange has always been a very nice prize for any service provider, even more so after their acquisition of the Chicago Board of Trade and NYMEX.  They are audited by EY.
Morningstar, the local investment research company, is audited by EY.
AON and Allstate, the Chicago area insurance companies are audited by EY and Deloitte , respectively.
The infamous Chicago area trading firm Refco was audited by Grant Thornton.
Suffice to say, PwC has no financial services audit presence in Chicago, the second largest financial services market in the United States, especially in the area of complex securities, options and derivatives trading, brokerage, securitized lending, and other topics of importance in the current financial crisis.
So tell us PwC… Where are all the auditors, GAAP and IFRS experts, and technical futures, options and derivatives trading experts you need now for all of your current clients, Goldman Sachs, a bigger and more risky JPM Chase and Bank of America, Freddie Mac, AIG, and the new TARP work going to suddenly come from?  
Are you growing them on trees?
Many others have now questioned the awarding of the TARP contract to PWC and EY and the lack of transparency in the overall bailout contract award process. Some have also echoed my questions regarding why the auditors are not on the lists of those to blame for the crisis and lamented the fact that instead they are reaping the benefits of their own ineptitude, malpractice and spineless synchophancy.
There’s Jim Peterson.
And Tracy Coenen at Sequence Inc
Cate Long at Shopyield.com
Vinnie Mirchandani at Deal Architect
A whole site has been set up by Chris Carey at Bailout Sleuth
Loren Steffy in the Houston Chronicle.
Bruce Stokes and Corine Hegland at GovExec.com
David Sirota at the Huffington Post
The New York Times on the AIG profligacy

So, at this time, I’d like to reprint my arguments for why the auditors should be taking more responsibility for the crisis, as I explained back in November with reference to the subprime crisis.  The same arguments apply today.
**************************************************************************
As I was writing yesterday’s post about CEOs losing their jobs over sub-prime write offs and wondering why the auditors don’t lose theirs too, Dennis Howlett was penning similar thoughts, albeit with a slightly different focus and additional details. 

I also got a call from a reporter from the FT who asked me to explain why I felt the auditors were part of the problem. This reporter stated, “…the problem is not one of internal controls or lack thereof, but of building up portfolios of illiquid assets that were tricky at best to value in the best of times. So is that an auditor issue?”

Hopefully, my comments will end up somewhere in a column in the paper. In case not, I will summarize them here.

1)The essence of Sarbanes-Oxley is to validate controls exist to mitigate risk that threatens a company’s ability to meet its business objectives.

2)By getting into the sub-prime loan business, these banks and investment companies hoped to profit extraordinarily from above average to high risk activities.

3)The banks, mortgage and investment companies have an obligation to manage risk at all levels by implementing the proper controls to mitigate it, or at least to identify and monitor it so that the level and types of risk being accepted by the company can be properly disclosed to their investors and other stakeholders.

4)An important part of identifying, monitoring and disclosing these risks is to value them according to GAAP and to the extent a reasonable investor would expect. Another would be to reserve according to GAAP and to the extent that a reasonable investor would expect in the event of a change in economic or other circumstances.

5)As part of the external audit process, auditors must form an opinion on whether their clients are complying with GAAP (or the other applicable standards) and whether activities such as valuation of the investment portfolio and estimation of required reserves for potential portfolio losses have been properly performed. Does the client have the internal controls in place to assure that valuations and reserve estimates are correct according to accounting standards and provide a fair presentation in the financial statements of the assets and liabilities of the company?

Add to these obligations, the responsibility of the auditors to ascertain Tone at the Top, that is, whether senior executives have communicated the right tone regarding controls and completeness and validity of financial information so that managers are not afraid to alert them when a strategy or approach is no longer correct or when significant losses are probable or foreseeable.

In other words, serious financial problems don’t usually happen as suddenly as some companies like to make you think, because of foreign competition or some other boogie man for example. They are building up, slowly but surely, based on a lack of internal controls over managing risk.

The reporter asked me about the valuation issue. “Isn’t it a reasonable excuse to say no one could have seen this train coming?” she asked.   I reminded her that valuation is one of the quality problems that the Big 4 keep having when the PCAOB comes around. They can’t get it right or don’t think they are doing anything wrong. Unfortunately, the auditors, most of which at the partner level have spent their whole lives being auditors, always one step behind the financial innovators and potential sham artists they are attempting to audit, will always be playing catch up to the financial services masters of the universe.


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13 Responses »

  1. Francine,

    Spot on shot as usual. In other words the Big 4 failed in essence to forewarn clients of changing economic headwinds and the consequences of sloppy controls and/or risk management issues. In regards to your issues raised re: PWC I bet that the firm didn’t have the expertise needed to valuate and assess complex derivative and exotic securities such as CDS-I’d be willing to bet neither did any of the other Big 3.

    I suppose this is a recruiting+structural issue-the guys who engineer these exotics always make a beeline straight to the white shoe firms because of the pay check and the Big 4 have all but spun off the management consulting expertise needed to give at least a macro view of things.

    Some questions for you:

    -Given the 78% (and disgracefully oligopolistic) market share the Big 4 enjoy and in light of your previous post re: the impotency of the next two “Mid Tiers” to step up to the plate what are the options to mitigate some of the risk associated with a failure of one or more of the Big 4?

    Do you favor a breakup of the Big 4 similar to the situation in the
    70’s or advocate the GAO step up to perform some of the Big 4 role?

  2. Francine, over the past few months, you've provided lots of good information about the Big 4 accounting firms. Based on the information at your disposal to date, which of the Big 4 accounting firms would you suggest that a brand new accounting grad join? Please only pick one and explain your rationale.

    I would have picked PwC, because they seem to have inherited the most work from this financial crisis. The other firms seem to be losing work, which may eventually translate into layoffs.

    I would rank E&Y second and KPMG or Deloitte 3rd or 4th. What are your thoughts?

  3. @8:23:00

    You’ve given me an idea for a good post for tomorrow. I have several other things in the “on deck circle” but I love good questions. Can’t promise I’ll follow all your rules though.

    ;)

  4. “reserve according to GAAP and to the extent that a reasonable investor would expect in the event of a change in economic or other circumstances.”

    You can’t reserve for things that might occur due to “changes in economic or other circumstances.” That’s not GAAP, which is what financial statement’s are suppposed to be based on. Well, unless the SEC starts accepting financials prepared under FAAP (Francine’s Accepted Accounting Priciples).

  5. @11:14:00

    FAAP? I can dream can’t I?

    Some of the technically minded readers don’t differentiate between what I know has to be done and what I wish could be done for the benefit of the investor. Take my arguments for more full extensive disclosure under FAS 5, for example. Just because some auditors don’t know how they’d possibly do it doesn’t mean it shoudn’t be done.

    If you look at the top of the blog, on the banner, it says that, in my opinion, “…THE CURRENT APPROACH TO SAFEGUARDING SHAREHOLDER INTERESTS AS WELL AS THE OTHER STAKEHOLDERS OF THE MODERN PUBLICLY TRADED GLOBAL ENTERPRISE IS NO LONGER EFFICIENT NOR EFFECTIVE.”

    You’ll enjoy me more if you you’re not always trying to catch me in a mistake of interpretation of GAAP, SAS, FAS, FASB, AUS, IFRS, or any of the other rules those of you who choose to stay in the profession have to be able to recite by heart.

  6. So PwC, as the 3rd largest auditor of the financial services sector in the world, is “not a player”? Using your logic, Toyota is not a player in the auto manufacturing business. Coors is “not a player” in the US beer market. Apple is “not a player” in the computer industry.

    Could you please explain to me, since I can be dense occastionally, how 3rd largest in the world, with 20% market share, is “not a major player”?

  7. Being # 3 or # 4 in a four horse race is not really being in the race in my opinion, especially given the level of specialized knowledge that auditing the financial services industry requires. We all know that no one but the Big 4, for the most part, audit these global financial services firms.

    The point of my contention regarding PwC’s relatively low level of financial services audit staffing and expertise is that given their significantly fewer number of clients in the large financial services firms category prior to the last few months, they could not have possibly had the number and type of resources required to do the amount and type of work they are now called on to do. It’s just not possible, since I don’t think those folks were sitting on the bench, waiting for a crisis to force them into active service. In fact, based on my observations in Chicago in 2005-2006 I know they weren’t.

    And given their track record with the clients they did have, like Northern Rock, AIG, and Freddie Mac, maybe what they had weren’t the sharpest pencils in the Big 4 box. Oh, and there’s also that gem here in Chicago managed from NY, the Federal Home Loan Bank. Don’t make me go there.

    Any specific staffing data I have from my time in Internal Audit for the firm at PwC or that I have been sent since is not appropriate to be disclosed, since I honor my responsiblity to maintain confidentiality and ask others to do the same. That doesn’t mean the data doesn’t inform my opinions. What data informs those who disagree with me?

    Unless PwC or a commenter (non-anon) wants to counter my opinions with specific data to reassure all of us of their troop strength, I will consider this thread closed.

  8. 7 CommentsClose this window Jump to comment form
    Anonymous said…
    Francine,

    Spot on shot as usual. In other words the Big 4 failed in essence to forewarn clients of changing economic headwinds and the consequences of sloppy controls and/or risk management issues. In regards to your issues raised re: PWC I bet that the firm didn't have the expertise needed to valuate and assess complex derivative and exotic securities such as CDS-I'd be willing to bet neither did any of the other Big 3.

    I suppose this is a recruiting+structural issue-the guys who engineer these exotics always make a beeline straight to the white shoe firms because of the pay check and the Big 4 have all but spun off the management consulting expertise needed to give at least a macro view of things.

    Some questions for you:

    -Given the 78% (and disgracefully oligopolistic) market share the Big 4 enjoy and in light of your previous post re: the impotency of the next two "Mid Tiers" to step up to the plate what are the options to mitigate some of the risk associated with a failure of one or more of the Big 4?

    Do you favor a breakup of the Big 4 similar to the situation in the
    70's or advocate the GAO step up to perform some of the Big 4 role?

    Wed Nov 05, 07:24:00 PM CST

    Anonymous said…
    Francine, over the past few months, you've provided lots of good information about the Big 4 accounting firms. Based on the information at your disposal to date, which of the Big 4 accounting firms would you suggest that a brand new accounting grad join? Please only pick one and explain your rationale.

    I would have picked PwC, because they seem to have inherited the most work from this financial crisis. The other firms seem to be losing work, which may eventually translate into layoffs.

    I would rank E&Y second and KPMG or Deloitte 3rd or 4th. What are your thoughts?

    Wed Nov 05, 08:23:00 PM CST

    Francine McKenna said…
    @8:23:00

    You've given me an idea for a good post for tomorrow. I have several other things in the "on deck circle" but I love good questions. Can't promise I'll follow all your rules though.

    ;)

    Wed Nov 05, 08:27:00 PM CST

    Anonymous said…
    "reserve according to GAAP and to the extent that a reasonable investor would expect in the event of a change in economic or other circumstances."

    You can't reserve for things that might occur due to "changes in economic or other circumstances." That's not GAAP, which is what financial statement's are suppposed to be based on. Well, unless the SEC starts accepting financials prepared under FAAP (Francine's Accepted Accounting Priciples).

    Wed Nov 05, 11:14:00 PM CST

    Francine McKenna said…
    @11:14:00

    FAAP? I can dream can't I?

    Some of the technically minded readers don't differentiate between what I know has to be done and what I wish could be done for the benefit of the investor. Take my arguments for more full extensive disclosure under FAS 5, for example. Just because some auditors don't know how they'd possibly do it doesn't mean it shoudn't be done.

    If you look at the top of the blog, on the banner, it says that, in my opinion, "…THE CURRENT APPROACH TO SAFEGUARDING SHAREHOLDER INTERESTS AS WELL AS THE OTHER STAKEHOLDERS OF THE MODERN PUBLICLY TRADED GLOBAL ENTERPRISE IS NO LONGER EFFICIENT NOR EFFECTIVE."

    You'll enjoy me more if you you're not always trying to catch me in a mistake of interpretation of GAAP, SAS, FAS, FASB, AUS, IFRS, or any of the other rules those of you who choose to stay in the profession have to be able to recite by heart.

    Wed Nov 05, 11:28:00 PM CST

    Anonymous said…
    So PwC, as the 3rd largest auditor of the financial services sector in the world, is "not a player"? Using your logic, Toyota is not a player in the auto manufacturing business. Coors is "not a player" in the US beer market. Apple is "not a player" in the computer industry.

    Could you please explain to me, since I can be dense occastionally, how 3rd largest in the world, with 20% market share, is "not a major player"?

    Thu Nov 06, 01:24:00 PM CST

    Francine McKenna said…
    "Being # 3 or # 4 in a four horse race is not really being in the race in my opinion, especially given the level of specialized knowledge that auditing the financial services industry requires. We all know that no one but the Big 4, for the most part, audit these global financial services firms."

    That was the most ridiculous statement you have ever put into this blog. I have a feeling there are 32480329480234 firms out there that would LOVE to have PwC's market share, but maybe I am wrong. I doubt it, though. FM, you have really been trashing PwC lately and for no apparent reason. Something tells me that you had a favorite in the race to get the TARP work and when PwC won it rather than Deloitte or KPMG, you got angry and decided to bash PwC and the selection process. IMO, if PwC's market share is smaller than the rest of these firms, they have less of an opportunity to be biased. Also, KPMG, Deloitte, and E&Y all lost more clients than PwC during the "financial crisis", and PwC ended up picking up more clients than the rest. You say this makes them a bad candidate, I say this may possibly mean, they are better than their competition. Maybe, I am wrong.

  9. “On an anecdotal basis, I can also say that a quick survey of the Big 4 competitive position in the Chicago financial services market is telling. “

    BWWAAAHH HAAH HAA HAA!!!

    I knew you had nothing. Nothing whatsoever, to back up your claims.

    “How does an audit firm like PwC, one that’s really not a player, a dominant financial services industry expert in the past”

    They are the 3rd or 4th largest auditor of financial services IN THE WORLD! And they are “not a player”.

    This post is a joke, right? Please tell me it is a joke, and the real post is coming soon.

  10. To @7:13 and @7:29

    Sometimes I wonder if those that make comments do so only to disagree with me rather than to enter into a dialogue. At times it seems they really don’t read the posts or their context or my comments. When the majority of the commenters, both positive and negative, are anonymous, I have a distinct advantage. I have more credibility by virtue of the fact am wiling to stand behind my opinions and my proposals. Those of you who choose to remain anonymous, and the firms who do not provide names or data, do not.

    Let me address a couple of the statements in these two comments, again.

    My contention is that PwC, in particular, given their historic smaller market share of the financial industry audit clients compared to the rest of the Big 4, most likely did not and still do not have the numbers or expertise in as large a number or in the depth and breadth as needed for the new bigger and more risky audits. In addition, they did not prove themselves up to the job with the clients they did have, namely Northern Rock, Freddie Mac, and AIG, in my opinion.

    If they now suddently have more than enough, in numbers and expertise, to meet the needs of all of the bigger, more risky, and more complex clients, let’s see it. They did not reach a bigger share of FS assets audited now because they were chosen to be the best, but because JPM and B of A bought other firms. They inherited it and I question whether they are up to the job yet or ever could be.

    I do not feel I am “trashing” PwC disproportionately in this case. The title of the post is why “the Big 4″ are to blame for the crisis and in the post about TARP, I mentioned the faults of both PwC and EY. Frankly, there is no Big 4 firm that would have been without conflict. I have no favored firm, to say the least. The TARP contract award process has no transparency and the Treasury has no monitoring process to insure that conflicts are identified and independence is maintained. None are without doubt in terms of necessary expertise. As 7:13 said, PwC got the additional FS assets to audit because firms audited by EY, KPMG and Deloitte “suddenly” failed. Not a good advertisement for them either.

    In the end, it is hard to feel reassured that TARP, or any other audits by any of the firms, in particular PwC, is in good hannds when the information about who is working on TARP, for example, is redacted and partners don’t sign audit reports. Let’s see the names. Let’s check their bios, education, licenses and certifications, client history, and their history with law enforcement and regulatory agencies.

    If PwC or EY wants to show they have the best folks in the business on the job, then show their faces. And if anyone else wants to continue to disagree with my contention about any of the firms’ expertise or PwC’s level of staffing and expertise in FS, let them provide their data, with the firm’s or their name on it.

    Unless or until this happens, I stick to my opinions.

  11. I've been following your blog for a while now and I couldn't help but respond to this post specially the summary of points that you would like have appear in a paper. Here's my take:

    1) The essence of the Sarbanes-Oxley Act is to validate controls that support the reliability of financial reporting. i.e. controls that address risks of inaccurate financial reporting. There is a fundamental difference between operational controls and controls that relate to financial reporting. An external auditors opinion covers only the risks relating to financial reporting controls and certainly not risks that threaten a company's business objective.

    2) Yes, they did and paid the price for it. Higher the risk, higher the rewards or losses. Its true of any business. Its not for auditors to decide on the risk appetite of any company, whether it be a bank or a grocer.

    3) Yes they should have. Its part of good corporate governance. Its management's duty to disclose their risk appetite and risk mitigation strategy to their shareholders. It is certainly not the duty of external auditors in most parts of the world to express an opinion on that. For all you know, these issues may have been highlighted to management or even the audit committee by the external auditor as part of their management letters. If the management/ audit committee chose to ignore such communications to them, its no fault of the external auditor. I'm sure external auditors would be ready to provide an opinion this to the shareholders for an additional fee.

    4 & 5) External auditors are required to provide an opinion whether the financial statements are prepared in accordance with GAAP. The auditors business is to satisfy him/herself that the valuation is based on GAAP and is supported by evidence which demonstrates such valuation. If the evidence available with the auditor supports the valuation, it is not his business to be arguing the valuation. If there is anything to be blamed, it the the GAAP itself and the process by which they are created. In my opinion if anyone has an issue on GAAP, blame the standard setting process and not the auditors. If the auditors are part of that process then suggest ways of changing that, auditors cant be held to blame if GAAP provides an option that enables managements to get away with valuations that you dont think are reflective of the reality.

    I agree with you that serious financial problems dont usually happen suddenly.

    If you're asking the question about what the internal auditors were doing, I would think that is more relevant in the context. Matters such as internal control over business objectives, risk appetite and mitigation are very integral part of internal auditors work. If internal audit has reported these matters and it has not had any effect then blame audit committees. Its the entire governance structure thats to be blamed for this mess.

    I think you are missing the woods for the trees by going after the external auditors.

    Finally regarding the comment about PwC not being prepared to take up the financial services audits that they have been "endowed" with. I must say firstly that its a far worse reflection of the firms who have had their client collapse than it is on PwC. Secondly whenever there are major realignments such as these, quite obviously it takes time for the the business to get up to speed with the changes. Its not like businesses everywhere are geared up to meet any unxpected eventuality. Rest assured that PwC will have its best foot forward when it comes to meeting these challenges.

    I rest my case.

  12. @9:41:00

    Thanks for your thoughtful and pretty thorough comment. I do disagree on some key points though.

    In 1 and 2 You say: “An external auditors opinion covers only the risks relating to financial reporting controls and certainly not risks that threaten a company’s business objective.”

    And

    “… It’s not for auditors to decide on the risk appetite of any company, whether it be a bank or a grocer.”

    I think you are letting the auditors off the hook for considering issues such as “going concern” which I will be writing about in more detail soon and whether the auditees business will continue for the time proscribed by the standards. That takes a little more than just “oh well” when management disagrees with auditors about the reasonableness and viability of their judgments and decisions.

    I also think you are mixing up the responsibility of the auditors to opine for Sarbanes-Oxley purposes and their overall audit opinion in the financial statements. External auditors’ opinion certainly covers an opinion of the overall risk environment and how well executives are managing all risks to the company’s business objectives as they relate to the risk of material misstatements . Maybe you’re not familiar with SAS 104-111? https://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Authoritative+Standards/auditing_standards.htm

    “…the Risk Assessment Standards establish standards and provide guidance concerning the auditor’s assessment of the risks of material misstatement (whether caused by fraud or error) in a non- issuer financial statement audit; design and performance of tailored audit procedures to address assessed risks; audit risk and materiality; planning and supervision; and audit evidence.

    In developing the Risk Assessment Standards, the ASB, which sets auditing standards for audits of privately held businesses and other “non-issuer” entities, had three objectives:
    • a more in-depth understanding of the audited entity and its environment, including its internal control;
    • a more rigorous assessment of the risks of where and how the financial statements could be materially misstated; “

    “The auditor considers many factors in determining the nature, timing, and extent of auditing procedures to be performed in an audit of an entity’s financial statements. One of the factors is the existence of an internal audit function. “
    https://www.aicpa.org/download/members/div/auditstd/AU-00322.PDF

    We’ve seen in many cases that when an internal audit function is impotent, nonexistent or squelched it’s a bad sign. But how often do the external auditors seriously consider that in determining whether to still give a company a non-qualified opinion? Navistar, Ceridian, Sirva, SocGen, AIG….

    You also said: …”whenever there are major realignments such as these, quite obviously it takes time for the business to get up to speed with the changes. Its not like businesses everywhere are geared up to meet any unexpected eventuality. Rest assured that PwC will have its best foot forward when it comes to meeting these challenges…”

    Thanks for saying it. That’s all I’ve been trying to say. And I am encouraging the Treasury and potential clients to scrutinize very carefully any firms staffing depth and breadth in FS, including PwC’s when considering them for new or more complex work.

    I’m not going to get into the valuation issue here. I’ve written enough about that. Suffice to say, the audit firms surely hope they will not be scrutinized on how well they did or didn’t scrutinize their clients’ valuation approaches and what tools they used to do that and how well qualified the folks who did that work for the audit firms were. I expect they will settle any claims like that that come up rather than subject themselves to discovery on these topics.

  13. [...] the subsequent financial “crisis,” have been described in this blog numerous, numerous, numerous times. Let’s look at those examples: (1) procedures designed to provide reasonable assurance [...]

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