• Big 4 Blind Items – Spring Edition

    By • Mar 31st, 2008 • Category: Deloitte, Goldman Sachs, Internal Audit, PricewaterhouseCoopers, Sarbanes-Oxley

    For your commenting pleasure, a variety pack of ponder-ables

    Which multi billion dollar global government contractor was one of the few, if only,  public companies of its size to be cited for a material weakness due to an ineffective internal audit function?  This is not the typical “completely missing” internal audit function but one that existed in name only and completely missed the mark in serving as part of the internal control structure.  After hiring and now firing a new VP of Internal Audit, they’ve thrown up their hands and turned the whole thing over to Ernst and Young.

    Who can name all of the Fortune 500 public companies with material weaknesses in information technology controls, especially over systems development, change controls and access controls?  How many more financial services companies are going to get away with blaming “rogue traders” instead of admitting they took their eye of the ball on IT and so did their auditors due to lack of  competent staff to do the work and to audit it?  How much longer are companies going to get away with ignoring the strategic role of IT ?
    Which NY-based Big 4  Managing Partner sent out a nationwide mass email warning staff that with a softening economy, employees may be asked to retool and work in some unfamiliar areas?   At least this firm is admitting they have a structural problem and not lots of personnel problems.  However, this “communication” caused enough stress for at least one person that they wrote me.   Let’s hope, although I’m not optimistic, that this isn’t the first tumble down the slippery slope towards mass layoffs at this professional services provider. 
     
    Which Big 4 firm has a Code of Conduct that doesn’t require its vendors, clients, and business partners to comply with the same lofty standards as they insist on for their staff?  They’re about to be hit from all sides by those that want them to practice what they preach and make sure one particular vendor and its investor, who’s also a very large client of the firm, doesn’t embarrass the firm any more than they already have.

    Which New York-based Big 4 partner likes his extracurricular activities to be hosted by the same kind of girls that his former governor preferred – very young and very dirty?  How long can he get away with charging the events to his  firm credit card and billing his clients for these  “meals” ?




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    13 Responses »

    1. Deloitte is at least two of those that I can think of.

      Another: Which big 4 is so worried about their PR that they are sponsoring primetime ads with the MLB to bring “baseball back to innercity”?

    2. I hope this post is evenly distributed among all four firms. However, with your sense of humour I wouldn’t be surprised if they were all, oh say PwC, for example? Form my sake I hope I’m wrong.

    3. That government contractor was Navistar. They also had a material weakness around their “tone at the top”, found executives guilty of “intentional misconduct” but kept the CEO even after their restatement wiped out $2 billion in equity! Now they filed an 8K with 2006 audited financials and no internal control report. From a Big 4 perspective, KPMG, who gave a clean opinion on the 2006 finanials, but had to disclaim on internal controls, is the one bearing all the risk now. Maybe the Board, the SEC and the PCAOB look the other way as long as you continue to make MRAPs for the troops!

    4. All very good questions, is there an answer key to this pop quiz?

      I think one of the very good questions posed is “How much longer are companies going to get away with ignoring the strategic role of IT ?”

      So many IT controls are too easily bypassed to be relied upon. Firms also spend too much time testing irrelevant IT controls, and not enough time focusing on the ones that matter.

      -IJustWorkHere

    5. I would not be surprised if #3 applied to more than one firm.

      I agree IJustWorkHere, we need an answer key!

    6. #4 is PwC. The vendor is the company that the NYC office outsourced its cafeteria service to.

      Personally I think this is more of an issue between the vendor and their investor.

      -IJustWorkHere

    7. Which Big 4 Firm is outsourcing (aka off-shoring) audit/tax effort to India but is charging their U.S. clients the full hourly rate even though the cost of professionals in India is at least two-thirds cheaper than the cost in the U.S. ????

    8. does it start with a k and end with a g?

    9. not to my knowledge, although perhaps all of them do this; but since i posed the question, i decide was that “right” answer is; therefore you now have one strike. take another swing at the plate.

      and, we need to know the answers to the other scenarios as well.

    10. When all of them have had some speculation, I will tell you what I know. Number 1 is Navistar and Number 4 is PwC. So, to the second anonymous commenter, no they are not all PwC…

    11. Uncle D agressively engages in outsourcing to their India arm. And we aren’t just talking scheduling or answering phones.

      What do I win?

    12. With regard to offshoring/outsourcing work to India or anywhere else and charging clients US rates…. This is pretty much par for the course. Firms will never pass on any savings to clients. That’s why they do it, duh…

      When I worked in Latin AMerica for KPMG Consulting/BearingPoint, my US colleagues would frequently ask me for resources from south of the border to fill in at a multinational at a cheaper, “third world” rate. I didn’t do it, unless the opportunity was a good professional development situation for the person. And, often my colleagues lowballed the rate for a professional that was sometimes more qualified than their US team. If I had an MBA with five years experience, all the SAP or Ariba or Microsoft certifications, who spoke English well and could lead a team, why would I sell them cheap to the US when I could get premium rates from Cemex?

      Which Big 4 firms imported IT auditors from Pakistan during 2006 for their Chicago office in order to circumvent the constraints on resources imposed by their audit practice? They realized too late in the process it was was more expensive to do that, given visa, housing and other costs, than it was to just try and recruit and retain locally. Unfortunately, these decisions are made, sometimes, on an “other than pure business” basis.

      Anyone who has answered correctly and wants to identify themselves to me in an email or call will get a prize.

    13. Uncle D is the winner! My own personal view is that their behavior would never pass what I would call the “Business Week Headlines Test”.