The FT (paywall) is saying the US Chamber of Commerce is deeply concerned that litigation against accounting firms could precipitate a disaster:
It reflects concern over the possibility that one of them – PwC, Deloitte, KPMG or Ernst & Young – could collapse if multi-million dollar lawsuits brought for alleged negligence bring a firm’s partnership to its knees.
The Chamber’s co-chairperson William Daley believes the risks to the remaining forms would ‘skyrocket.’ He also claims:
…the next tier of firms lacked the capacity to take on the business of a collapsed larger firm.
This is clearly designed to protect the Big Four. Why? Vested interests? Why should it be that Andersen was allowed to collapse but it is now no longer acceptable that the misdeeds of the remainder should go unpunished. OK – the US is the most litigious country on the planet but this plea is not good enough. Andersen was a travesty – an entire firm destroyed by the misdeeds and greed of a few. But then that’s part of the problem with collective responsibility as envisaged by partnership.
The Big Four have collectively wrecked the reputation of the profession. They consistently fight against attempts to breach their oligarchy, most recently engaging in blatant political chicanery under the pretext of protecting corporate tax payers. Despite the appearance of neutrality, they are hopelessly conflicted. Sarbanes-Oxley has become the full employment charter for these firms, beaming with delight as they report ever higher profits.
When, as is the case with PWC, the average partner profit (not the top or the bottom but average) is £716K, then you have to ask: what risks are they prepared to shoulder? Apparently few. Yet the tales of woe continue. Again from the FT (paywall), CA shareholders are up in arms over continuing accounting problems with one of the three US proxy advisory groups calling for KPMG to not be reappointed as auditors.
CA is a poisoned chalice so whomever takes it over has a problem on their hands. Nonetheless, I warned back in 1999-2000 that CAs accounts were such a mess that it was almost impossible to figure out what was going on. At the time, I was asked to dissect the figures and couldn’t. CA kept shifting the goal posts on revenue recognition leading to horrendous obfuscation. When you see stuff like this from afar, how come the auditors didn’t call the directors to account? We now know the directors were actively engaged in fraud.
What the Big Four don’t understand is that the perception of public safety they have fostered through work done to ensure SOX compliance has consequences. No good crying wolf now. I’ve warned this year could see a major collapse. Unless the regulatory bodies get a grip (and that includes ICAEW with its see-saw approach to ethics and IASB with its position on tax) then don’t be surprised to see one of them take a massive hit.
Technorati Tags: Big Four, Deloitte & Touche, ethics, KPMG, Ernst & Young, PwC, Sarbanes_Oxley, SOX
