Friday, September 30, 2005

KPMG Just Keeps Getting into Trouble

I read the Financial Times today as I took the subway into the office, and I was surprised to see that KPMG is again in trouble with the goverment. I feel bad for the folks at KPMG. It's a strong firm that does great work. The vast majority of the staff at KPMG is extremely talented. These continued problems must be tough on the average associate there.

Well, KPMG's latest travails involve the auditors. According to the Financial Times, the Public Company Accounting Oversight Board (PCAOB) has taken issue with 76 of KPMG's public company audits, 19 of which have been flagged as extremely problematic. Few details have been released by the US government or KPMG.

What really drives me nuts about the continued legal problems of KPMG is the impact it has on employees and partners unrelated to the audits being investigated. Of the thousands of employees at KPMG, only a small fraction are involved in the work being investigated. But, the damage to KPMG's reputation affects all of them. The same thing happened at Andersen, where the impropriety of a only a few brought down the entire firm. Such bold investigation and prosecution is inappropriate in the accounting industry at present. The industry is far too fragile.

Fragile? I know; how can I call four firms with a combined market cap of over $60 billion fragile?

Think about it - the demise of Andersen led to an increased consolidation in the accounting industry, as the vast majority of Andersen's employees and clients wound up at the remaining Big Four. Concerns arose quickly about the virtual monopoly the Big Four has in the public company accounting space. Fears intensified as KPMG's indictment seemed inches away (for more, check out If the Big Four were to become the Big Three, the resultant lack of choices for public companies would make auditor indpendence even harder to enforce.

The aggressive pursuit and prosecution of the Big Four needs to change. I am not suggesting that the Big Four be given too much lattitude in the way they conduct audits. Of course, that would be absurd. The protection of shareholders is paramount. But, the government needs to change its approach. The overzealous pursuit of Big Four impropriety could lead to what public company CFOs fear most - a Big Three.

Prior to this ordeal, KPMG settled with the US government - to the tune of $456 million - to avoid prosecution for abusive tax shelters that the firm sold to high net worth individuals from 1996 to 2002. KPMG is on a "probation" of sorts for 18 months while an independent overseer validates that the firm has changed its practices.

Any thougts on this?

Tom Johansmeyer

Life After Big Four?

There are two reasons for taking a job at a Big Four firm. One is simply to get it on your resume. Working for a prestigious firm such as Deloitte or KPMG helps significantly in future job searches. Big Four names are universally recognized as purveyors of extremly high quality services. Once you have worked for a Big Four, you have access to other top-tier companies in any industry.

This is why most people go to the Big Four initially. It's just like the legal community. Young attorneys take jobs at places like Davis Polk and Skadden ARps to get two or three years under their benlts before pursuing opportunities elsewhere. Accountants and consultants are no different. They seek the experience and prestige of a stint at the Big Four before moving to another ocmpany for more money, less travel, shorter days, and so on.

But, something happens.

The second reason for working at a Big Four firm is more substantial, and it quickly surpasses the two-or-three-years-and-I'm-out-of-here dreams of young associates. The primary reason for a Big Four career - as far as the Big Four as an institution is concerned - is the partnership. You work at a place like Ernst & Young or PricewaterhouseCoopers because you want to be a partner someday. I went through this as well. I started out looking for some experience and a name on the resume, but my thinking quickly transformed.

Many Big Four professionals, even Senior Managers, are starting to think about alternatives to the traditional Big Four career path. But, finding alternatives is difficult. When you have had your goals tied to the partnership for so long, you tend to lose sight of the alternatives.

Most Big Four professionals, especially consultants, have trouble fitting into the "real world," which makes the transition even more complicated. Normal jobs, where your workload and tasks are more consistent and predictable, differ profoundly from the lifestyles of the Big Four. Consultants are accustomed to having varying schedules, new projects, and different people every few months.

"You mean I have to see the same people every day!" Ouch.

The best solution I have encountered is to forsake the daily grind for the life of an independent consultant. Hang out your own shingle and go freelance.

What makes the freelance consulting market attractive is that you can keep the aspects of Big Four life that you find attractive while shedding those that are more frustrating. You can pick your own projects and turn down those that don't interest you. If you don't want to travel, you don't have to! Just take local work. Generally, you won't have many work weeks that exceed fifty hours. When you do, though, you'll get paid for all that extra time. Speacking of cash, you'll be paid what you're worth. Freelance rates tend to yield higher annual incomes than Big Four salaries.

Yes, there is a considerable amount of risk in this choice. You'll go through periods of lower rates - and sometimes no work. But,if you plan effectively, your rates will compensate for the lulls. The happiest ex-Big Four professionals I know have opted for the freelance route. They only take projects they like, and they usually make a lot more than they did at their respective firms.

There is definitely life after Big Four.

Tom Johansmeyer

Thursday, September 29, 2005

Welcome to the Big Four Blog

The Big Four community is different from that in most other industries. Big Four veteran have a little more in common with each other than people who have worked in any other industry. Many Big Four professionals have worked for more than one of the Big Four, and a lot of us have entered and left the Big Four (if you're like me a few times) using our Big Four connections.

But the Big Four community is more than a network - it's more like a community within a community. There is something that makes a stint in the Big Four different from having been an auditor or consulant anywhere else. It's a mix of prestige, frequent flier miles, and working on projects that show up in Newsweek and the Wall Street Journal.

This blog will discuss all things Big Four - and then some. Not limited to Big Four veternas or current Big Four employees, I plan to address a variety of other issues that affect the Big Four - and the rest fo the business world. Sarbanes-Oxley, for example, means a lot to auditors who cut their teeth at Ernst & Young or KPMG, but it is also important to the broader business community.

Whether you have worked at Deloitte, KPMG, E&Y, or PricewaterhouseCoopers, or none of the above, you'll find something useful here.

If you are a consultant hoping to start your own firm as I did once - well, twice - or you are finishing your MBA and looking for that big break, you've come to the right place. This blog will be useful to everybody - except those lacking ambition.

A few more housekeeping items . . .

I write a lot. I promise to give you something new every weekday, but I'll write a bit more when the mood hits me. Also, I won't dwell exclusively on the Big Four; I'll give you some variety. For those of you who haven't worked for a Big Four firm, don't worry. I'll explain the lingo, though you can get some background at

Most important - keep in touch! If you have any ideas or topics you would like me to cover, don't be shy. Either post a reply or e-mail me at I look forward to hearing from you.

Tom Johansmeyer