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PwC to fail?

by Dennis Howlett on February 18, 2009

I have a bet on with Francine McKenna that PwC will be the first of the big firms to fail. While this may seem like idle and irreverent sport to many, it is a serious issue. Quinn Forensics, a specialist firm of forensic accountant poses the question: Is PwC be about to be barred from India following the Satyam debacle. At the end of the post, the firm asks:

It is hard to imagine a more damaging case against PwC then having two of their senior partners admit their complicity in the largest fraud in India’s history. If there were ever a case where debarment is appropriate, this is it. But this isn’t PwC’s only worry. Obviously, civil suits are going to have a devastating impact on the remaining PwC partners’ deep pockets. The $64 million dollar question is whether a debarment in India and the resulting civil suits will bring down one of the “final four” on a world-wide basis. Stay tuned.

The fact a forensic firms feels confident enough to pose the question suggests a level of seriousness that I’ve not seen before. PwC’s future is the elephant in the room that few people are talking about but it is something about which its staff and customers should be concerned. I always felt that the loss of Andersen’s was something of a travesty. Sure, the firm behaved badly but that doesn’t compare with KPMG’s tax fraud problems or the current issues around PwC in India.

Barely a day goes by without some financial scandal or another turning up in the press. Increasingly we are seeing the role of auditors come under scrutiny. Confidence in the audit profession has plummeted among my peers to a new low. Satyam may be one of the final nails in that particular coffin. It is hard to see how PwC can survive given the weight of inevitable problems.

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Tagged as: Francine McKenna, KPMG, PricewaterhouseCoopers, Pwc, Satyam

  • I agree with you that Andersen's demise was a travesty. For at least the past 30 years, Andersen was considered among the best, if not the best, of the Big Eight. I was quite surprised that it went down based upon the actions of a just a couple of their employees and partners. When comparing what those Andersen partners did with what the PwC partners in India have done, I don't think there is any doubt that the Satyam fraud is far and away the more egregious. I real question is whether the location of the actions means more than the actions themselves. In other words, I believe that had the PwC partners committed their actions in the U.S., then PwC would be in dire straits. Furthermore, it would be all over the press. In contrast, because the actions took place in India, there is barely a whisper in the media about either Satyam or PwC (at least here in the U.S.). Just my thoughts.
  • There are a few of us who are trying to amplify the issues and I am starting to see mainstream press picking up on the issues. PwC is in a really bad place on this because they are trying to argue global brand but local organization. It's a fundamental inconsistency that goes ot the heart of what it means to be a global firm.

    PwC has already effectively thrown its Indian partners under the bus. The question is whether the firm as a while can survive in that jurisdiction. DiPiazza was out there schmoozing like crazy at government level suggesting they are deeply concerned.

    As you said, the upcoming lawsuits are going to be horrific and that is what will determine the final outcome.
  • Nice story, I posted indirectly to on my own blog.

    You are right about the problem "they are trying to argue global brand but local organization. It’s a fundamental inconsistency that goes ot the heart of what it means to be a global firm."

    I believe one way to tackle this problem is by using franchising as the corporate vehicle, and I wrote about it here: http://www.bizop.ca/blog2/due-diligence/franchi...

    Be interesting to see who will fail first: PWC or Deloitte.
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