The End of the Big 4 ?

There is a very thought provoking post on The Auditors Blog recently

A few tidbits

“The public’s patience may be running out. One sure sign is that investors are starting to blame big accounting firms for frauds at places they never even audited. There’s been no indication that PwC or KPMG, for instance, should have known Bernard Madoff was running a Ponzi scheme when they blessed the books of other funds that sent him money. The firms are getting impugned anyway, even though Madoff’s auditor was someone else.

Then there are the scandals where the firms have lots of explaining to do. Last week, PwC’s India affiliate issued a statement about its work for Satyam Computer Services Ltd., which overstated its cash by $1 billion. The firm said its audits were conducted “in accordance with applicable auditing standards and were supported by appropriate audit evidence.” “

We’re starting to see a flood of statements similar to the one above by PwC regarding Satyam. Wait! That’s what PwC said when they pulled their audits at Yukos. And that’s what EY is saying as it begins to distance itself from its prior audit opinions at Anglo Irish Bank.

“Ernst and Young confirms that all of the audits conducted for Anglo Irish Bank shareholders were undertaken in accordance with the appropriate auditing standards.

Let’s tear down the walls and rethink how we should protect the investor, who in many cases is now the taxpayer. Get rid of the for-profit audit firms involvement in the nationalized entities and those receiving government bailout funds and draft all able bodied audit and accounting professionals into the National Service Corp for Accountability and Transparency. TM

The public companies, what’s left of them, can pay a fee like banks do to the FDIC/Federal Reserve now for exams. The audit firms should have no direct profit motive and no relationship with the companies or their executives. They will work for the government and have no legal further responsibility for the audits. (That’s one thing that should make the Big 4 happy.) The audits will performed by the government with a new National Service Corp for Accountability and Transparency TM and additional remaining audit firm loaned staff.

The full post is linked below. 

http://www.retheauditors.com/2009/01/how-will-we-solve-financial-crisis.html

I look forward to your comments.

Posted by Robert Fligel, CPA on Wed, January 21, 2009 - 10:00 am EDT

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