« Around the Media – “The Economist” Gets A Good Deal Right | Main | After Charlie Hebdo – France Expresses Its “Liberté, Égalité and Fraternité” »

January 06, 2015

Comments

Bert T. Edwards, CPA, CGFM, CGMA

This a interesting white paper. Among issues not covered are (1) a four-to-three redistribution of clients is infinitely more complicated due to conflict-of-interest issues (among large companies in the same industry, consulting work done by a potential new firm, important portions of an international auditee located in a country which is not served by any of the "final three", the largest multi-national auditees' inability to engage a competent replacement firm, etc., (2)the well-accepted complication of an initial audit expense, (3) nationalistic regulations on licensing new offices of a "final three" successor firm, (4) inability of audit functions in states, the GAO, and international audit offices to conduct a GAAS audit (already in the US, US States and larger cities are moving/have moved to using private CPA firms and the focus of many international audit functions on operational audits vs. financial audits, etc. In the post-ENRON era, many observors believe the "final four" (to use a basketball term)have survived an audit issue equal to or even greater than ENRON since it did not make any sense to contract the choices available for a change. Unintended casualties might well be the abandonment of the market of insurance of any type on surviving say top 20 firms that are currently expanding via acquisitions. Auditor rotation for many auditees will become impossible if that movement gains support world-wide - it is already tough enough for a large auditee to change!

Jim Peterson

Bert - Thanks for your thorough and incisive comment. You are dead-on several critical issues that are essential to an adult dialog around the viability of the current Big Audit model; space constraints limit fuller treatment here, but they are all addressed in my blog archive.
By the way, "final four" is a terribly inappropriate term -- as the NCAA tournament comes down to a single survivor. If a sporting metaphor is needed, "Russian roulette" is more suitable.
Jim

Henry Motyka

Brings back memories of what happened at Coopers & Lybrand when a bad audit of a disk drive manufacturer almost brought down the firm.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)

Never miss a post
Please enter all required fields
Correct invalid entries

  • © 2007-2017 James R Peterson Special thanks: Francine McKenna. Always with love: Kat and Julie. In memory: Bob White, Stuart Kadison