GRC

The cat's out the bag: Big 4 are Big 4x

March 20, 2008 General

Richard Murphy has long argued that the Big 4 are not a single entity in the way they market themselves but a loose association of affiliate firms. This, as any practitioner will tell you, is not the same thing at all. This is a question Francine McKenna has raised arguing that: But how “actual ” [...]

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Where's the quality?

January 24, 2008 General

This is an ongoing problem because it is difficult to see how the profession, and in particular ICAEW, can claim a certain status without solid quality checks which demonstrate a commitment to standards…. And then to cap it all, last evening an overseas colleague working in France says the acquired working papers for a job he’s on, won from a Big Four outfit that features prominently in these pages, are substandard…. But the real problem is that confidentiality and an antiquated notion of ethics often seems to prevent the conscientious practitioners from shining through. How can they explain to clients they’re doing a great job when much of what they do is ‘hidden’ yet essential stuff for which others continue to lowball? The argument will always be that the chances of detection are so low that ‘getting away with it’ as Mark Lee said in comments to an earlier post would now appear to most definitely swing both ways…. It was therefore sad to see one practitioner on AccountingWEB asking whether he was insane for offering a discount: I have recently taken on a new client and agreed a fee of £2,500 + VAT…. I have an opinion which is in the AW comments but I was particularly pleased to see a different view by Jason Dormer who said: This is clearly a man who lives and works by values and good for him in not taking the option that the majority in every trade and profession would take. He’s right of course and I suspect the impact it has had on me is in no small measure due to the fact I have been seeing so much crap in the last few days.

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Norwich Union fined £1.26 million: where have I heard this before?

December 17, 2007 Featured

This summary from the usually excellent Finextra: The UK’s Financial Services Authority has fined insurer Norwich Union £1.26 million for failing to protect confidential customer data from fraudsters. The City watchdog says Norwich Union’s life assurance unit did not have effective systems and controls in place to protect customers’ confidential information and manage financial crime risks…. Slack call centre security allowed fraudsters to use publicly available information – including names and dates of birth – to impersonate customers and obtain sensitive customer data, says the FSA. In some cases criminals were able to ask for confidential customer records, such as addresses and bank account details, to be altered. The fraudsters then used the information gleaned to request the surrender of 74 customers’ policies totalling £3.3 million in 2006…. We’ve seen this kind of thing before – or rather variants stretching back a number of years. Remember the RBS fiasco in 2002 where the FSA said: There was insufficient evidence to show that the clients were who they had claimed to be, whilst in some cases RBS were unable to supply copies or details of the documents (such as a valid passport, a driving licence, a recent utility bill) it had used to verify identity…. The fact that the processes underpinning these failures do not appear to have been the subject of any serious review implies that auditors are yet to be adequately trained or even consider the need to have identity tests put into audit packs.

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PCAOB slaps Deloitte with $1 million fine

December 10, 2007 Featured

After years of criticizing the Big Four, only to have them come back and disagree, PCAOB have called time…. PCAOB has also barred former partner James Fazio from being associated with a public accounting firm for two years, after which he can petition to get his place back at the trough. According to Financial Week: The PCAOB alleges that Mr. Fazio “failed to perform appropriate and adequate procedures” relating to Ligand’s revenue recognition practices and also failed to ensure that others performed such procedures. The PCAOB also found that after Deloitte determined Mr. Fazio was not performing his work adequately—ultimately asking for his resignation—it did not remove him as engagement partner on the Ligand audit…. While it is sad to see the profession brought to this position, I hope it will be a wake up call to the Big Four but more important ICAEW. The Institute focuses a lot of its attention on the smaller practitioner yet with this action, PCAOB is signaling that real attention needs focusing elsewhere. As an aside, Jeremy Newman, managing partner at BDO has long argued that firms like his own can do just as good a job as the Big Four. Without wishing to muck rake, it seems to me that if BDO and Grant Thornton (as examples) want to take some of the Big Four business, they need to be thinking about operating at a higher level of competency than the Big Four.

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ICAEW misses the mark on data loss

November 28, 2007 General

ICAEW tries so hard to be polite when I know behind closed doors they’re fuming at the 25 million person data loss…. Second – they point to: There is clearly a need for a formal and independent inquiry into this incident and we welcome the Poynter Review of HMRC’s handling of confidential data. However, we suspect that the causes are likely to be deep-rooted and point to the need for a much wider reform of HMRC’s management and operational practices…. HMRC and Government need urgently to rethink the approach to service delivery to ensure that problems such as this do not recur. Well yes – but as Richard Murphy might say – that’s like News: man bites dog. We could all say that and keep PwC gainfully (OK – maybe not) employed with producing deep and meaningless strategy documents which will surely be the outcome…. I know Mark and he is a seriously bright chap. He wrote the definitive tome on DB2…. He may not have PwC or KPMG slapped on his forehead but he has a reputation among geeks the Big Four can only envy.

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ICAEW misses the mark on data loss

November 27, 2007 General

ICAEW tries so hard to be polite when I know behind closed doors they’re fuming at the 25 million person data loss…. Second – they point to: There is clearly a need for a formal and independent inquiry into this incident and we welcome the Poynter Review of HMRC’s handling of confidential data. However, we suspect that the causes are likely to be deep-rooted and point to the need for a much wider reform of HMRC’s management and operational practices…. HMRC and Government need urgently to rethink the approach to service delivery to ensure that problems such as this do not recur. Well yes – but as Richard Murphy might say – that’s like News: man bites dog. We could all say that and keep PwC gainfully (OK – maybe not) employed with producing deep and meaningless strategy documents which will surely be the outcome…. I know Mark and he is a seriously bright chap. He wrote the definitive tome on DB2…. He may not have PwC or KPMG slapped on his forehead but he has a reputation among geeks the Big Four can only envy.

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If I've got this right…

November 26, 2007 General

If I’ve understood Francine McKenna correctly, she is saying that because of the way US based auditors are using client-attorney privilege, it is almost impossible to say with any degree of certainty that independent audits are indeed audits or, for that matter, independent…. I suspect that other stakeholders are on an unheard collision course with both the managements of audit firms and the companies they audit…. Except if SEC investigators find they are abusing their position to the public detriment (however that gets defined and with stiff penalties.) If you can’t be sued then you’ve got a cast iron shield that should make you fearless and not fearful. The alternative – if it is ever possible – is that somewhere along the line, one of the Big Four wakes up and remembers why Anderson WAS a great firm…. Ever tending and nurturing their talent to believe in a system rooted in scrupulous behaviour, they turned out professionals in every sense of the word. Something went wrong and it’s called greed, coupled with the arrogance that they could get away with it and compounded by the ignorance of a day one intern…. I prefer to argue the Big Four have been walking towards this zero sum game for enough years to know that something has to be done – or collectively implode.

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PwC CEO heading up World Business Council for Sustainable Development

November 26, 2007 Featured

The press release says: Mr. DiPiazza said he would bring an independent mindset and a wide international and cross-industry perspective to help the WBCSD. With increasing public concern about the environment and the growing gap between have and have-nots, business, government and civil society must address these challenges together. Independent – now there’s a big word and not one I’d expect to see applied to PwC which, along with the other members of the Big Four cartel has a lock on how issues like ‘sustainability’ are defined…. Regardless of the brand position, fact remains the Big Four spend more time acting in the interests of a sliver of all stakeholders…. They won’t include indirect stakeholders like the smaller shareholder, labour organizations and the like where I suspect the answer might be very different…. JTurquey makes the point well: Mr. DiPiazza’s firm must be an example: there must be no gap between what is said or communicated and what is enforced or implemented all the more than when dysfunctions are public and/or official. The differences between PwC separate and independent legal entities in the definition of topics like CSR wants clarifying: Luxembourg, the small place where everybody knows everyone, is a telling example. So wants clarfying the censorship on sensitive issues like economic crime where Luxembourg is as well a telling example as auditors’ independance is not sought but steady growth is.

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New roles at Skype/PayPal – parse with care

November 26, 2007 General

The FT is announcing a couple of new jobs at Skype/PayPal. The job titles sound interesting: US GAAP Business Partner and Compliance but it is in the descriptions that things get a bit murky: The role includes interfacing with the business to understand objectives of new deals prior to signing (or new business models prior implementation) to proactively structure transactions to maximise operating and accounting goals, presenting conclusions to External Auditors to ensure compliance with US GAAP and SEC reporting requirements, presenting impact to top finance management and proactively seeking areas of judgment that need focus in order to avoid any unexpected accounting outcome in the future. The problem is one of location (at least for one role.) Luxembourg has one of the most secretive banking frameworks around. How will it be possible for what is in effect a compliance position to discuss structures without considering the tax consequences? A clue might come from the phrase ‘unexpected accounting outcome.’

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Transparency International – one small but crucial step

November 20, 2007 General

It now seems TI is extending its definition of corruption to embrace at least some of the activities of the banking community: Cobus de Swardt told the Financial Times in his first full interview since becoming TI managing director in June that corruption “facilitated by bankers and financial centres” had received too little attention by the global pressure group, but that this was changing. Founded in 1993, TI was now entering a “second wave” of corruption campaigning focused more on the responsibility of western governments and companies for “perpetuating corruption in poorer parts of the world”, he said. I have long held the view that corruption doesn’t exist in isolation and is most certainly not restricted to the activities of errant governments and their officials…. In recent meetings and conversations, I get the impression that professional bodies hold to the view that self regulation remains a viable route to ethical standards maintenance…. Again from Richard: How can a man who watched his own firm nearly go to the wall and pay fines of $456 million because it failed to comply with so many legal and ethical requirements made of it possibly be suited to this role?… Perhaps the citation for his recent AccountancyAge award had something to do with it: More recently, he led KPMG through the US tax shelter scandal. He described the episode as his own ‘personal nightmare’ after the US authorities threatened to launch a criminal prosecution that could, potentially, have caused a similar loss in confidence in the firm as that suffered by Andersen…. Additionally, this act pulled back from an action that could have removed another Big Firm from the audit market, a outcome that could have caused regulatory chaos in financial markets as corporates struggled to find audit services and avoid conflicts of interest.

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