• For The Auditors Nothing’s Over Until It’s Over: Or Is It?

    By • Mar 23rd, 2010 • Category: Latest, Pure Content, The Big 4 And Globalization

    The leadership of the Big 4 audit firms – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers – are scared witless. The auditors prefer to be Switzerland. That is, they prefer to remain neutral.  They don’t like the kind of attention that Ernst  & Young is getting.  They like the soft, managed, scripted kind of attention for Davos, diversity, charitable endeavors and support of higher education.

    Until the Lehman Bankruptcy Examiner’ Report was issued on March 11th, the auditors had experienced a “good crisis.” No serious scrutiny of their behavior, no testimony before the various investigative committees of the US Congress and only a few lawsuits that had not yet come to trial.

    October 2008, Gavin Hinks in Accountancy Age:

    “Speaking at a meeting of accountants from across the world at the Mansion House yesterday, Paul Boyle said: ‘So far at least, auditing has had a good crisis.’

    Detractors, Boyle added, had been vague in their complaints and had misunderstood the role of auditor, on the one hand, and corporate governance and financial services supervision, on the other. These statements are notable because Boyle is clearly sticking up for the profession. If he had thought the opposite he would presumably not addressed the subject during the speech. This is active backing for auditors.”

    So much for that.

    The Lehman Bankruptcy Examiner threw the word “fraud” into the financial crisis conversation.

    The words “auditor malpractice'” followed.

    It’s quite likely EY will be called before the US House Oversight Committee to testify about the Lehman bankruptcy. David Einhorn, a member of the much maligned “short club,” will probably be called to testify, too.

    I criticized Ernst & Young in mid-2008 for not questioning Lehman’s CFO revolving door. Lehman had chosen another non-CPA CFO, the second one in less than three years. I was following the lead of another Cassandra, David Einhorn. Einhorn is now being heralded because he questioned Lehman’s accounting, in spite of being ridiculed and damned for it at the time. He’s getting almost as much applause as the “whistleblower” du jour, Matthew Lee.

    Einhorn has also recently been vindicated in another case where he called foul and faced harsh criticism.

    The SEC’s watchdog found that the agency failed to properly pursue serious allegations made against Allied Capital, a public company that invests in small to midsize businesses. But after heavy lobbying by Allied Capital, the agency aggressively pursued the hedge fund manager who had challenged the value of Allied’s investments…The case…began in 2002, when a hedge fund manager named David Einhorn explained in a speech that he bet against Allied Capital’s stock by short-selling it because he thought Allied overvalued its holdings.

    Other investors proceeded to short Allied’s stock, which declined sharply in value.

    About the same time, Einhorn began contacting the SEC by phone and letter to explain his skepticism about Allied Capital’s accounting techniques. Allied also worked behind the scenes to urge the SEC to investigate whether Einhorn was engaging in illegal behavior to undermine the company’s shares, according to the inspector general’s report.

    Without any specific evidence of wrongdoing, Allied met with SEC investigators in June 2002 to urge them to investigate Einhorn. Shortly thereafter, the SEC opened a probe, questioning Einhorn about his trading activities, subpoenaing documents, and seeking his telephone records and a list of clients. Soon after investigators started looking at Einhorn, they concluded that he had done nothing wrong.

    Sources tell me that the SEC Inspector General’s report on the Allied Capital investigation paints an even worse picture of the SEC than those involved ever expected.  For example, it was the SEC lawyer who grilled Einhorn that later became a lobbyist for Allied and was the one who hired private investigators to steal Greenlight Capital’s phone records. Allied Capital’s auditor is KPMG. They are not yet accused of any wrongdoing, but the report also discusses the mis-valuations that Allied was originally accused of by Greenlight.

    Maybe it’s time to start listening to the “shorts” and the contrarians.

    Many ask me if Ernst & Young will fail because of Lehman.  I have answered that in previous posts.

    In short, not immediately.

    Maybe E&Y won’t be the first of the remaining Big 4 to fail.  The leadership of the Big 4 are terrified because any one of them could be thrust into the harsh spotlight the way Ernst & Young has been. At any time.

    Because they’re all on the brink.

    Take KPMG.  When the New Century Trustee v. KPMG US and KPMG International lawsuit comes to trial, you can bet the media will suddenly remember there’s an auditor smoking gun there, too. Mr. Missal, the New Century bankruptcy examiner, found emails that uncovered the same kind of disregard for KPMG’s experts and their risk and quality gurus that we saw in Arthur Andersen’s handling of Enron. New Century is more like Enron for that reason than EY/Lehman is.  So far.  That we know of.

    Depending on how well Steven Thomas tries it, the media will be all over the “KPMG will fail” scenario.  Losing the case carries a $1 billion dollar price tag for KPMG.  There’s also significant implications for the global network business model in addition to the enormous costs of KPMG defending themselves in the meantime.

    Arthur Andersen’s partner ignored his own expert’s advice in Enron. KPMG is accused of doing the same in New Century. All for the sake of keeping a lucrative client. EY may have done the same to hold onto Lehman.  Certainly the long, lucrative relationship between EY and Lehman paints a similar picture of mercenary motivation.

    When EY’s Lehman audit team ran into the growing use of Repo 105 transactions, or the declining market value of the CDOs, or the Archstone REIT or any of the other problematic accounting issues mentioned in the Examiner’s report, one of four scenarios took place:

    • The audit team didn’t ask for advice from their technical GAAP and SEC reporting/disclosure specialists at EY headquarters. The team went along and did what had always been done in the past: They acquiesced to Lehman CFOs.  After all it was the  Lehman CFO Goldfarb, an EY alumni who designed the transactions and approved the accounting treatments.  When Sarbanes-Oxley outlawed the revolving door of audit partners moving into high level positions at clients, Dick Fuld chose non-accountants who didn’t know better, would not question and weren’t interested in accounting.
    • Or…The audit team asked for advice from their technical GAAP and SEC reporting/disclosure specialists at EY headquarters.  The headquarters specialists blessed the existing treatment. After all it was Lehman CFOs who were EY alumni who had designed the transactions and approved the accounting treatments.
    • Or…The audit team asked for advice from their technical GAAP and SEC reporting/disclosure specialists at EY headquarters. The audit team received advice that the problematic issues represented unacceptable treatments according to current standards.  And/or  the experts suggested disclosures to clarify Lehman’s position. When this answer was brought to the audit partners they dismissed it and acquiesced to the Lehman executives. That’s similar the KPMG/New Century scenario.
    • Or…The audit team asked for advice from their technical GAAP and SEC reporting/disclosure specialists at EY headquarters. The audit team received advice that the problematic issues represented unacceptable accounting treatments according to standards.  When this answer was brought to the audit partners they raised the issue with Lehman executives, encouraged them to stop manipulating the balance sheet without disclosures using Repo 105 or to write down assets such as Archstone or the CDOs and were rebuffed.  Lehman executives threatened to fire them and replace them with another firm like KPMG and EY backed down.  We may never know if this happened unless or until EY partners are forced to settle  charges and flip on the Lehman executives.

    Or take the massive Satyam fraud-related litigation facing PricewaterhouseCoopers.  When the courts in the Southern District of New York decide that PwC’s motions to dismiss are denied, PricewaterhouseCoopers will face a flood of lawsuits that will dwarf New Century v. KPMG. The publicity over EY/Lehman  should make it difficult for the court to accept any lame excuses from PwC. PwC’s argument is that the case should be tried in India but they are fighting in India to have the case dismissed.

    New York courts will now hear age discrimination litigation that names PwC as a defendant because the courts agreed that decisions about PwC partnership are made in New York. That same theory can certainly be applied when it comes to PwC global leadership (elected to represent the interests of the owners of its largest member firms) and their control over a global client like Satyam. Satyam is a PwC client that was listed on the New York Stock Exchange. The global leadership exerted control over member firm India because it has significant strategic importance to the global leadership. The global leadership exerted that control using the PwC International Limited legal construct.

    The Satyam saga is far from over.  The PCAOB recently sanctioned two fairly low-level PW India staff. (They are actually employees of local Indian member firm Lovelock and Lewes.)  These employees are now “barred from being an associated person of a [PCAOB] registered public accounting firm” because they would not cooperate in the Satyam investigation.

    I asked PCAOB spokesperson Colleen Brennan if there was more to come. What about the Price Waterhouse India partners that were jailed?

    The order says formal investigation started Jan 8, 2009.  It is now 14 months later and the outcome is that they wouldn’t talk to you.  What took so long? Generally speaking the investigative process requires getting relevant audit work papers and other documents and scheduling the testimony of witnesses.   Particularly in cases where witnesses are located abroad, which is the case here, the staff works with the witnesses and their counsel regarding an appropriate location for the testimony.  Depending on the location, different planning goes into scheduling the testimony.   Under the Board’s rules, witnesses are allowed to have counsel present during their testimony.  In this instance, the auditors obtained new counsel during the investigative process which led to a postponement of the original testimony.

    Is this it on your Satyam activities?  What else is PCAOB doing to address the Satyam matter? The order mentions that the Board issued an order of formal investigation relating to the audits of Satyam.  We cannot comment further.

    What are next steps for PCAOB on Satyam? The disciplinary proceedings as to these respondents are complete.  The Board does not comment one way or another about the specifics of its investigative inventory.  (We cannot confirm that we have an ongoing investigation because Section 105(b)(5)(A) of the Act. This is the first case where we barred someone only for non-cooperation with Enforcement.)

    Has the Board charged any other Lovelock & Lewes personnel, or Lovelock & Lewes, the firm, in connection with the Satyam audit? We cannot comment on whether others have been or will be charged.  These orders only address the conduct of Messrs. Ravindernath and Prasad.

    Are the Board’s investigation and disciplinary proceedings in connection with this matter completed? These disciplinary proceedings are completed as to Messrs. Ravindernath and Prasad.  The Board does not comment one way or another about the specifics of its nonpublic investigative inventory, or about any proceedings that may be in litigation before the Board, which are non-public as required by the Sarbanes-Oxley Act.

    What prompted the Board to investigate the audits and reviews of Satyam’s financial statements? The orders disclose that Satyam filed a Form 6-K with the SEC on January 7, 2009, that its chairman had revealed that he had inflated key financial results, and the Board issued an order of formal investigation on January 8, 2009.

    Is the SEC also investigating this matter? Do you expect the SEC also to take enforcement action against Satyam management, or the auditors in this matter? As a matter of policy, the Board does not comment on SEC investigations.

    Don’t forget Deloitte has its own subprime/crisis litigation already on the docket.  They are named in lawsuits related to the acquisition of Merrill Lynch by Bank of America and the failure of Bear Stearns, as well as the bankruptcy of Washington Mutual.

    Finally…

    PwC, EY and KPMG are named in significant Madoff feeder fund litigation and it looks like those cases are starting to move through the courts.  There are billions of dollars in damages that will probably be paid.

    Each of the largest global audit firms could take a hit of $1 billion if forced to.  They would find a way to come up with the cash.  But they don’t want to.  A $1 billion dollar settlement would make a significant impact on any of the firms.  A settlement or judgment, especially of that size, would make it very difficult to stay in business even if the firm remained technically viable.

    But there are several $1 billion claims out there.  All four of the largest firms are suffocating under the weight of the potential claims and the cost to defend them as well as the distraction from normal business activities and the impact on morale.

    The Big 4 feels the pain on a rotating basis, only for a short for a while, and only whenever a painful exposé such as the Lehman bankruptcy report surfaces or a case gets closer to trial. Then the media moves on. Very few cases against the auditors went to trial in the past.  There are many reasons for this.  But the sheer volume of cases filed given number of scandals, frauds and failures, is giving plaintiff’s lawyers and regulatory enforcement more practice than ever before.  The plaintiff’s lawyers, in particular are talking to each other, sharing information and getting better at their arguments with each filing.

    The tide’s gone out and left the audit firms high and dry.

    Which case will be the showcase trial of the new millennium? Which billion dollar case will make it to the jury first? Which case will force legislators and regulators to admit the business model for public accounting is irreparably broken?

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    24 Responses »

    1. Interesting post. As a recent intern, soon to be new hire, I’m just starting to really understand this industry. Everything that has happened in the last month has led me to believe accepting a job with EY would be more risky than accepting one anywhere else. Would you consider this a true statement, Francine? Or is EY just as likely to fail as any of the other three, as this post seems to indicate?

      It’s starting to sound a bit like a crap shoot…

    2. @Potential new hire

      I rarely, if ever, tell a new graduate not to join the big firms, or to join any particular one. At the beginning of your career your risk tolerance should much higher. Lots of time to work through any kinks and adjust for forks in the road. Of course everyone is different and so that’s why I like to talk to someone one on one before giving specific advice. So for a new graduate, no, I don’t think EY is any more risky than any of the other Big 4. But that’s just it. The industry itself is not what it used to be. Unless you can go in totally detached, taking what you want from it, setting your own timetable and sticking to it, not falling in love or letting yourself get fooled into thinking you are different than anyone else when priorities of the partners change…

      Every office is different, every partner and managing partner runs their little piece of it, to some extent, individually within a loose confederation of principles and standards that are tested only in adversity. If you find a group of people you like, trust, can learn from and respect, then it’s worth all the benefits it can bestow. But be realistic about the situation. It will end on their time not yours unless you are very careful.

      I am, however, advising most against joining BDO and, in particular, an aggressive new BDO office in the South East led by an ex Big 4 partner that seems to be recruiting 3-5 year folks from all parts. I’ve had several calls. BDO Seidman’s windup is inevitable once the judgement for Banco Espirito Santo is affirmed. One month, six months, twelve months… Do you really want to be subject to whatever the next deal those guys can make will be when that happens?

      For an experienced hire (Senior Manager/Director), the Big 4 is an accident waiting to happen. I would not advise it. Unless you’re getting a lot of dough up front, I would advise against it. They may be whispering sweet nothings in your ear now, but they’ll stick the shiv in your neck later if it suits them.

    3. Francine-

      Why exactly is it you feel that the accounting treatment was wrong?

      Yes, the accounting policies note should have included that repos were counted as sold when such sales met the definition under FAS140 – but you appear to be missing a choice above – the treatment was OK’d by technical and they said that it needed to be disclosed but the audit team forgot to check it.

    4. @ Slightly Less Sceptical

      Good point. I need to revise to address the missing disclosure issue, assuming you believe the accounting is technically correct. Which no lawyer in US did. And many accounting experts such as Lynn Turner do not.

      My column at GoingConcern.com today will talk about the accounting. Check later this afternoon.

      Thanks.

    5. Francine-

      Re your comment about the lawyers – that wasn’t about the accounting treatment. Read FAS140 again – the Linklaters true sale letter was about bankruptcy law, not how to account for something.

    6. Francine,

      Over the past 8 years or so (since the demise of Andersen) I’ve noticed a pattern when it comes to audit failures and the Big 4:

      1. The Firms stand by their work until facts emerge that make their transgression undeniable.
      2. The partner directly involved with that transgression takes the fall while the Firm escapes criminal charges.
      3. The Firm pays out some money via lawsuits and penalites, enough to hurt but not enough to put them out of business.
      4. Everything returns to business as usual.

      Suppose EY turns out to be culpable of malpractice, which may or may not be the case, I see nothing in the EY/Lehman case that suggests the above mentioned cycle will not repeat itself. However, from the tone of your posts it seems like you disagree. Aside from the size of the Lehman failure (largest bankruptcy in U.S. history) is there anything special about this one that makes it different from all the other times the Big 4 got away with a relative slap on the wrist?

    7. What if several of the suits really do go on? Will the firms cry “We’re too big to fail!”? Really, what if we did lose one or more? What would the effect be? Now that Obama is changing his focus to financial market control matters, is there any chance the audit issues will be addressed?

    8. Thanks Francine, that’s great insight. Obviously, as with the majority of people going into Public out of college, I hope that in 5 years I will be able to proudly display “5 years experience with a Big 4 accounting firm” on my resume as I potentially seek a new, non-public career path. I guess my concern is that 5 years from now people will be looking for Big 3, rather than Big 4. Still, I guess that if that happens, the remaining Big 3 are going to have to hire most of the failed firm’s employees in order to keep the industry afloat.

      Again, thanks for the advice. I appreciate it.

    9. Hi Francine,

      As a former BDOer, can you describe a little bit more about what you think the implications of the Banco Espirito Santo case will have on the firm as a whole. I remembered the news breaking during my 1st year but being on the west coast, I did not hear too much in regards to the developments. The fact the partners were pretty hush hush didn’t help either.

      I’ve already moved on to an industry job but I do ask this because I am concern about some of my friends still employed there.

      Thanks for your help!

    10. @Former BDOer

      I really don’t have much more to say on this but what I said in comment #2 above. Hope that helps.

      fm

    11. Francine,

      I’m not surprised by the revelation of what the audit should have done especially after the Arthur Anderson-Enron scandal that resulted in the enactment of SOX.

      The report on Lehman’s bankruptcy by the examiner Anton Valukas exposed what I had suspected for years because the culture is still about making the numbers look good or the use of aggressive accounting and management’s demand to accept what they say it is or they will find someone else. It was predictable that EY would say what they say because it is basically PR and the the same can be said for the CEOs of the banks implicated. It is all about political posturing: witness the amusing statements by the CEOs at the Financial Crisis Commission.

      The lawsuits will wind its way through the court and there will be further revelation beyond what the media wrote.

      I worked at Chase as a temporary for over a year in the Financial services(Correspondence Lending) and had to deal with teaching people about the accounting process and the hows and whys it is done that forms the basis of the Financial Statements. You can clearly see the impact of the financial crisis on the company’s earning reports over the past several years.

    12. What I actually should have wrote in the last sentence was the effect of the correspondences’ Financial Statements not Chase itself.

    13. […] word that dared not be uttered, even behind closed doors, has now disturbed the peace of a nascent “recovery.”  Why did […]

    14. I clicked on this post because I am convinced from reading your postings as well as others, that auditors have a share of the blame in the mess that we are slogging through. And since I am a vindictive old man, I would like to hasten the arrival of the “over” in the “until its over”. I don’t have the resources to initiate a law suit but I do have a pile of proxies on my desk. I’ve been voting against the appointment of auditors I feel were complicit in Wall Street’s shenanigans. Is this responsible? Would it cause a company that is playing by the rules undue expense to replace an auditor? Is there a second tier of firms capable of stepping up if big firms are replaced? A post on the process of an auditor showing up on my proxy ballot would be helpful. I’m sure its mostly inertia. Please tell me what to do.

      P.S. Sorry about the tulips this year. I guess I didn’t fertilze enough last Fall. I won’t let that happen again!!! Did you get a haircut?

    15. @Dave

      So nice I have finally convinced you of something… I’ve heard you are just plain cranky rather than old and vindictive. But, six of one, half a dozen of the other, I guess.

      Voting against the appointment of these auditors in proxies is the right move. It sends a signal that someone is paying attention. If only more did… But you hit the nail on the head – if it’s not one it’s got to be another when it comes to the largest companies. A more effective tactic would be to start a movement, via the power of the internet, that tells shareholders not to take the auditor for granted. There is a long list of audit firms that were part of the problem at their clients and not part of the solution. PwC and AIG is probably my pet peeve.

      I will take your editorial suggestion for a post on how shareholders can hold auditors accountable under advisement.

      As you can see, the internet is a powerful tool. And it’s cheap. And easy.

      I would be glad to discuss further next time I come around your corner. Your fence looks great and the boss, mom, actually thinks your yard looks quite lovely. For a guy. And yes, my hair is a little shorter. Hopefully that won’t dissuade from waving next time I beep the horn.
      fm

    16. Re Philip J Fry #6- close, but in my experience it is a little more like:

      1) We didn’t do it ! (and quietly settle)

      2) OK, we did it but it wasn’t our fault (and less quietly settle)

      3) Damn, I guess it was our fault but “it was a different time” (partners – grab your ankles)

    17. Okay – I’ll play my usually disruptive role, e.g. giving nieces & nephews drum sets for Christmas, and invoke a simple rule: vote against any auditing firm I believe complicit in the recent financial problems AND vote against all board members on the Audit Committee.

      However, on my first attempt to invoke my new rule I find in the proxy materials: “Our organizational documents do not require that our shareholders ratify the selection of […] as our independent registered public accounting firm. We are doing so because we believe it is a matter of good corporate practice. If our stockholders do not ratify the selection, our Audit Committee will reconsider whether to retain […], but still may retain them. Even if the selection is ratified, our Audit Committee, in its discretion, may change the appontment at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.”

      Now if I only had more than 50 shares of any company! I’m going to call Vanguard & Fidelity to see if I can get them on board.

      P.S. Maybe if you hadn’t gotten the tinted windows on that Ford EscortAudi A6 Quattro, people would recognize you and wave more.

    18. @Dave

      I’m a disruptive auntie in a slightly different way – I give all my nieces and nephews books that are wholly inappropriate for their age. I remember the time I gave “Are You There God? It’s Me Margaret” to a second grader.

      I sense you’re feeling the impotence of the typical shareholder when it comes to proxy rights. I remember I once asked Nell Minow, one of the foremost corporate governance experts, why shareholder activists focused on so many other changes I felt would have much less impact than shaking up the cozy complacency between auditors and audit committees. Hmmm, let me think about that, she said, and then I never heard any more.

      http://retheauditors.com/2007/06/20/pwc-and-aig-way-past-the-time-to-resign/

      I’ve spent the last three plus years trying to convince those who can force changes that auditors should and could have a more positive impact on corporate governance, if they were forced to.

      As I mentioned before… Power and influence comes with numbers. Maybe you and I need to disrupt a few shareholder meetings with thousands of votes behind us that we’ve gathered via the magic of the internet.

      That might be fun. ;)

      fm

      PS. I typically travel incognito and/or with Rosie Rottweiler. Mom thinks one of these angry accountants will stab me in my slender neck with a mechanical pencil if they can catch up to me.

    19. I wouldn’t say i feel impotent.

      This is this the first time I’ve read the proxy material with regard to the appointment of the auditor and was surprised to find it is a non-binding. I’ll pay more attention going forward. I think if that is standard corp policy then we have to also vote against re-appointment of any directors on audit committee to truly get their attention.

      I would guess that shareholder activists don’t focus on this is because it is not quickest path to maximize value. In fact, a switch in auditors would probably be more expensive and disruptive in at least the first year. Why should I cause company A grief and expense for using the same auditor as Lehman. I’m all for fun, ask anybody on the block, but I’m looking for responsible fun.

    20. @Dave

      Good to hear you feel you can still have some impact…

      It can be frustrating, though. In theory, choosing the auditors and monitoring them should be one of the most important activities for the Audit Committee. In practice, the emphasis instead seems to be managing liability for the corporation, its management and the Directors themselves.

      It is expensive and time consuming to change auditors. But it is done. And corporations are holding auditors’ toes to the fire more now in this economic environment. They didn’t feel able to so during the hey day of Sarbanes-Oxley. The auditors had the upper hand. But I fear that a focus on pleasing management, getting along and being “cost effective” is the wrong emphasis. Auditors should be adversarial. They are supposed to be watchdogs, guardians of shareholders’ interests. It may be increasingly impossible to perform this function well as long as their profits are dependent on winning and retaining audit clients – essentially the management/Directors and not the broad shareholder base.

      So back to “what can I do…” If an auditor has been part of the problem, such as I believe PwC has been with AIG, for example, I have strongly advocated that their largest shareholder, the US taxpayer, kick them out. Any new eyes, fresh eyes, hungry eyes are better than the embedded jaded ones we have now. In the same way, I wrote today about the crock of crap that is KPMG auditing Citigroup for 41 years. That’s a toothless watchdog, chained up in the backyard, barking, if it even has the strength or nerve anymore, into the wind.
      http://goingconcern.com/2010/05/group-hug-the-treasury-department-votes-to-reappoint-kpmg-as-auditor-of-citi/

      If we focus on the most egregious cases, the message will start to be heard. But it will take groups of shareholders to make more of it happen. Binding or non-binding, I am not kidding about the power of the internet. For a case study on how it can work, look at my friend Eric Jackson, principal of Ironfire Capital. He recently led a small group of dissident Yahoo shareholders in an internet/blog campaign against the idea of an independent Yahoo and the management and Board at the time.
      http://www.nytimes.com/2008/02/11/technology/11iht-dissident.1.9924800.html

      There’s all kinds of fun. What used to be considered odd or eccentric is now quite mainstream.

      fm

    21. Reading the above posts and the various associated strings on your website, I can’t get past the age old question of how can you be truly independent of the hand that feeds you? Any ptr who loses a client the size of Lehman or AIG will surely and quickly be terminated and the firm would have to lay off an equivalent number of FTEs to compensate for the loss of hours.

      Can the “system” withstand the loss of another firm? Probably, but all have culpability. I think the point really should be who should be performing the financial statement certification, who should be selecting them and who should be paying them? If another firm arose to audit one or two global companies, they’d be even more beholden to these companies than the existing Big Four.

      As to whether the mutual fund companies should be more activist, they presumably deal with all four firms so to them, one is pretty much the same as the next.

    22. […] started in the UK back in early 2009. The auditors had been claiming a “good crisis.” They fear that a blockbuster lawsuit, if successful, could put one or more of them out of […]

    23. […] word that dared not be uttered, even behind closed doors, has now disturbed the peace of a nascent “recovery.”  Why did it […]

    24. […] In February of 2008 , I wrote about Treasury’s attempt to address the nagging issues of viability and sustainability of the accounting profession. […]

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