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The Berkshire Hathaway Annual Meeting draws a huge crowd because it features several hours of the wit and wisdom of Berkshire Hathaway CEO and Chairman Warren Buffett and his friend and Vice Chairman Charlie Munger. To say that Buffett, Munger, and Berkshire Hathaway have a cult-like following would be a a significant understatement. I attended the meeting and here’s my report.
Stanford University Graduate School of Business Professor David Larcker and his research associate, Brian Tayan, have developed a case study on the recent David Sokol – Berkshire Hathaway corporate governance slip-up. They emphasize, “The success of this system is predicated on the expectation that Berkshire Hathaway managers operate with high levels of integrity.” I don’t think Berkshire Hathaway’s leadership defines corporate governance the way everyone thinks they do. The bigger question is: Should that matter to their investors or anyone else?
Here’s the speech and slides I used for the AAA Public Interest Conference on April 1-2 and Top X list of possible research topics for accounting and audit academics interested in public policy.
I’ll be at the American Accounting Association Midwest Conference in Columbus, Ohio May 12-14. I’m on a panel to discuss the audit firm model and will take questions at a separate session. Hope to see you there.
If you would like me to speak for your group, please email me at fmckenna@mckennapartners.com
It’s the potential for sudden conflagrations in developing countries that keeps the global audit firms – PwC in this case – up at night. The legal quagmires in developed countries are messy, too. PwC may want to put the Satyam scandal behind them but, unfortunately, I fear there’s still much more pain for the firm to come.
The Big Four, off and on, have had some of the largest global consulting practices across most categories.The larger an organization gets, the more its staff takes on the average characteristics of individuals within the markets it serves. Mark O’Connor of Monadnock Research presents a guest post on the special risks posed by Big 4 audit firms who provide consulting services.
I was in Washington DC to attend the March 24 meeting of the new Standing Advisory Committee (SAG) of the new PCAOB. I was surprised twice by a report presented by the PCAOB’s Investor Advisory Group at last week’s meeting. First surprise: Chairman Doty was right. Good people are looking at the issue of auditor effectiveness, especially during the crisis. Second surprise: The report quoted me.
The SEC has accused one of the most prominent businessmen ever implicated in such crimes, Rajat Gupta, a former McKinsey & Company Global Managing Director, of insider trading. It’s understandable that, in the heat of this moment, some might naïvely compare the consequences of the criminal indictment of an audit firm with civil charges against an individual, albeit one who trades on – pun intended – his association with a prestigious professional services firm. It’s not the same thing.
Big 4 audit firms are focusing on growth in their global consulting businesses but the conflicts that drove three out of four of the firms in the US to sell them after Enron are a bigger problem than ever before.
Mainstream media, and the Financial Crisis Inquiry Commission, are focused mainly on Ernst & Young as the auditor whipping boy of the financial crisis. That’s really by default not by design and is thinly justified. No one has given fly-over journalists anything on a silver platter that would draw in the rest. Give me a few minutes and I can make a case for PricewaterhouseCoopers as the one teetering on the edge of the abyss. Or KPMG. But today, let’s talk about Deloitte.
The UK accounting firms’ response to the “pressure” on the industry post-crisis is sharp, quick, and on message. But the “pressure” itself feels like a sinister strategy orchestrated by the audit firms to force legislators to grant their wishes under the mistaken assumption they’re “regulating” the industry.
Let me break it down for you.
 Francine McKenna (@retheauditors) has 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. Look for my column, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. Your firm can sponsor this specialized news site. For more information contact Francine McKenna, fmckenna@mckennapartners.com |
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