More KPMG woes

I’ve been tied up with mountains of other stuff recently so didn’t have time to cover the KPMG $1 billion problem re: New Century. Thankfully, Francine McKenna shone her laser light on it. There is one thing with which I disagree:

As much as I like the “deepening insolvency” theory on an intellectual level, it’s not been successful.  No less than Judge Posner has smacked it down, for what I believe are very naive and too limiting ideas about the auditor’s role. Maybe those are the limits of the law, unfortunately. Don’t go there.  This one seems clear cut enough on the negligence and professional malpractice points alone.

[My emphasis added.]

The negligence issue does seem clear cut but then auditors have proven very good at rolling with the punches and coming out the other side with barely a perceptible dent in their public reputation. However, I’m sensing a genuine change of mood in the US towards these kinds of problem. The US is in the mood to punish and I would not be surprised to see some ‘novel’ decisions in the coming months and years. Why should KPMG get a pass on this? Will it?

Of course the litigation wheels grind slowly and it could be years before this case comes to court – if it ever does. Which is highly unlikely unless KPMG digs its heels in. And by then the climate may be very different from that which we see today.

Even so, it is about time that KPMG was brought to account. The list of litigation and potential litigation it is facing is becoming frighteningly long.

I’ve had a wee bet with Francine that PwC will be the first Big Four firm to fail. I still hold to that bet. It is way too much a repeat offender to be allowed to continue in its current form. Even so, KPMG is displaying all the signs of a terminal cancer patient – riddled through and under attack by the same lawyer who successfully obtained large damages in the BDO- Banco Espiritu Santo case, currently under appeal.

I’ve said it many times before but we need a new kind of leadership in the profession. The Big Four are not providing it but are often deeply implicated in some of the worst board room behaviours.

UPDATE: mega cock up on my part. Originally said PWC – I’ve got a fixation on them – whereas I KNOW it is KPMG. Hence I’ve torn down the old post and replaced. Goes to find bush to hide under.

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