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PwC is scheduled to go to trial for malpractice related to the bankruptcy of SemGroup in August, almost six years later. The SemGroup Litigation Trust, pursuing claims on behalf of the company and its creditors, alleges PwC did a terrible audit. But it’s worse than just lousy auditing, especially if a trial exposes the truth of PwC’s disingenuous defenses.
Imagine my surprise when Ben Horowitz, one half of the venture capital team of Andreessen Horowitz, wrote a blog post about dodging a stock option backdating jail term that also implicates PwC.
Now that the Securities and Exchange Commission has crossed KPMG’s independence violations off its to-do list, the agency can move on to the rest of the ones I’ve already identified for them. How about PwC and its business relationships and myriad services provided to audit client Thomson Reuters?
SEC Administrative Judge Cameron Elliot issued a blistering decision last week in a long-running dispute over regulator access to auditor work papers in fraud investigations. The judge banned the Chinese Big Four firms from auditing US issuers for six months and lambasted them for voluntarily putting their firms “between a rock and a hard place.” The decision is not yet final but the enormous impact is already being felt worldwide.
How do the audit firms keep winning the war while losing battles left and right? They use the law and the courts to delay, deter and distract from transparency by settling, and sealing what they can, before the public can find out what silly arguments they often make in their defense.
We now know more about what the firms have been hiding. The global capital markets, not just current shareholders, need full disclosure of the engagement teams on all public issuers over time, and in a way that is easily accessible.
Are auditors too cozy with management and the Audit Committee? Unfortunately, that the way they all seem to like it. Investors and the capital markets suffer.
Deloitte has been caught thumbing its nose at regulators again. Deloitte is the best example in the Big Four of how a large consulting business corrupts an audit firm.
Last defendant standing. Not an enviable place for EY in the case, In re Lehman Brothers Securities and Erisa Litigation. Holding out until the end has now cost EY $99 million, more than Lehman officers and directors.
On September 11 Bill Ackman went beyond his ongoing accusation that Herbalife is pyramid scheme and sent a 52-page letter to PwC warning the firm it is exposed to enormous liability if it signs off on Herbalife audit opinions and Qs without a full investigation of several accounting, tax and bribery allegations. Ackman used my work to bolster his case to PwC.
 Francine McKenna (@retheauditors on Twitter) is a CPA, writer, speaker and subject matter expert with more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. She is a two-time Gerald Loeb Award finalist and a frequently quoted freelance journalist. For more info, click the "About" link at the bottom of this page. |
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