Round and Round She Goes… Where She Stops Nobody KnowsBy Francine • Jan 28th, 2009 • Category: Pure Content, The Case Against The Auditors
‘It will take courage beyond that shown so far, for a Big Four chief executive to inform his partners that their business model is broken, and requires replacement for the sake of future survival. If not, hindsight will charge the profession’s current leaders, whose state of public denial still avoids that difficult step, with a dereliction of their stewardship obligations to their younger generation. Because nobody else is going to rise to the occasion, the question is whether it matters enough today that they will.’ “
Last Thursday while I was in New York for a Huffington Post event at the 92nd Street Y, I heard reports that possibly sixty professionals, mostly at the staff and senior staff level, were cut from EY’s NYC Tax practice. A combination of losing a big client to in sourcing (Viacom), the overall economic outlook, and the oh-so-typical challenges of having the right staff on the right projects at the right time in the right location, caused leadership to throw up their hands and reach for the easy button.
What’s especially galling is that the professional I spoke to said he has recently participated in recruiting events for students joining full time in the fall and for summer interns. He thought the cuts were made strictly on the basis of utilization/chargeability. In fact, rumor was that one of the partners had tried to find work within the firm for the less utilized staff by offering to sell them to the Transaction Advisory Services or the audit team for $120 per hour, a discount. It’s endearing to hear intelligent professionals refer to such a mucked-up way of managing a firm and allocating highly educated professionals as a good faith attempt to do right by them.
“During an audit of the company covering its 1998-2001 tax years, the IRS requested Textron’s tax accrual workpapers, but the company refused to provide them, claiming that they are protected by various privileges, including the work-product privilege, even though they were at the least “dual purpose documents”. The First Circuit upheld the privilege, and even concluded that the company had not waived the protection by showing the internal workpapers to its outside auditor, Ernst & Young, calling the auditor-client relationship a “cooperative not adversarial relationship” that was unlikely to lead to litigation.
Asked if the valuation, which it said was done in an “unrelated context” was misused by Satyam, also founded by Raju, and if E&Y would take any action against the IT firm, the spokesperson said “no comments.”