The second edition of my book -- “Count Down: The Past, Present and Uncertain Future of The Big Four Accounting Firms” -- is, to my pleasure, just released by Emerald Books.
Deliveries are available – see Amazon. Up-dated, revised and extended, this trade edition is now designed -- and priced -- for readers in accounting and other professions, corporate management and governance, finance and investing.
The new “Count Down” brings into its updated narrative important developments since publication of the December 2015 first edition, affecting the Big Four and the threats facing their business model:
The Big Four’s growth to collective global 2016 revenue of $ 128 billion, and the structural implications of the continued growth disparities between their Audit and Advisory practices.
The imposition and implications of mandatory auditor rotation under legislation and regulation in the European Union; and in the US, the PCAOB’s requirement to name lead partners on public company audits.
New examples of corporate financial malfeasance, regulatory and law enforcement proceedings and potentially disruptive auditor litigation, involving each of the Big Four and their large global clients – of which a partial sample here:
- Deloitte’s Brazil firm in December 2016 incurred an eight million dollar penalty, the largest ever imposed by the PCAOB, and practice bars and other sanctions against twelve partners and employees, over confessed alteration of documents, false testimony and lack of cooperation with the PCAOB’s inspections and investigations.
- EY in September 2016 was the target of two SEC enforcement actions, involving censures, fee disgorgements, fines and practice bars against its personnel, over charges of loss of independence based on “close personal relationships” between engagement partners and client personnel -- in one case a romantic relationship and in the other, significant expenses paid for travel, entertainment, sporting events tickets and family vacations for the client CFO and his family.
- KPMG in April 2017 fired five partners and an employee, including its Vice Chair of Audit and its head of Audit Quality and Professional Practice, over its receipt and handling of advance inspection information leaked by an employee of the PCAOB.
- PwC’s delivery of the wrong “best picture” envelope, and the resulting tumultuous ending to the February 2017 broadcast of the Academy Awards, evoked public ridicule -- although the significance of the debacle was pale compared with the potentially fatal financial impact of two multi-billion dollar lawsuits, relating to its audits of Colonial Bank and MF Global, where jury trials in process in August 2016 and March 2017, respectively, were discontinued in favor of settlements for confidential amounts.
This new edition also expands in scope and detail on the required re-engineering by which – with the necessary but unlikely mutual cooperation among financial statement issuers and users, the accounting profession, legislators, regulators and agencies of law enforcement – a sustainable structure for financial reporting and assurance might emerge -- that is, a Big Audit model truly fit to serve today’s global capital markets.
The issues here have meaning and impact not only for professionals in the Big Four and the smaller but no less affected firms, but also for those working with and for public companies and their clients, and investors who rely on robust audited financial statements, as well as individuals and institutions holding the securities of public companies in their savings and retirement funds, Keoghs and IRAs, pension and endowment funds.
The story of the fragility of the business model of the Big Four retains its importance. In that spirit, I hope it is worthy of your attention. I invite you to order -- read -- enjoy (or at least be stimulated). Reactions are invited. Comments on Amazon are welcome and encouraged -- as are "likes," "shares" and RTs on Facebook and Twitter, messages on LinkedIn, and especially, recommendations to friends and colleagues. As for any disagreements or criticisms -- feel free to write me directly at [email protected].
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