Wednesday, October 12, 2005

This is making me extremely nervous

When I saw KPMG's name spread across the business pages regarding recent audit work, I was disappointed but not surprised. Let's face it - the firm has fallen on hard times. That they would be targeted by the PCAOB did not surprise me, though. Bad things happen. When I took a look at the news this morning, I was shocked to see that Deloitte is now sharing these PCAOB headlines.

These news stories are disturbing. Some-number-of-name-withheld-clients have restated earnings after federal regulators identified material problems in the audits conducted. What scares me is the fact that the names of the audit "victims" are not disclosed. We have no idea what the problems are. This news is not news at all. It merely announces undisclosed government findings. It appears to be bad press for the sake of bad press.

Like KPMG, Deloitte disagreed with many of the board's assessments. While this may be standard practice as a way to assert innocence in the court of public opinion, I think that KPMG and Deloitte may have a point. The PCAOB has become notorious for ineffective practices, vague guidance, and really having no connection to reality. The "perpetrators" appear more credible.

Reports for PwC and E&Y are on the horizon; it should be interesting to see what the PCAOB does. KPMG got nailed on 19 of 76 audits investigated (not a spectacular result), while D&T got hit for eight out of 125. No details were released.

How does this inspire confidence in public companies?

By Tom Johansmeyer

3 comments:

Courtney T. said...

Hi Tom,
While reading through your articles, I couldn't help but wonder what major firms you've worked at... would you be willing to disclose? If not publically, perhaps privately? I can be reached at ctre729@yahoo.com. Currently I'm writing a thesis on the KPMG tax shelter scandal and I start work at PwC in fall '06, so your response would be relevant - I'm not a stalker or something! ;)
-Courtney

Big4 said...

Courtney, I worked at Deloitte - twice. I did a stint at D&T, got laid off, started a firm with some other ex-D&T folks (they got rid of our service line), then I went back to D&T. The second time I was their, Deloitte Consulting took over my practice. I left about a year ago to become a writer.

If you would like to discuss further (eager to help with your thesis if I can) you can reach me at tjohansmeyer@gmail.com.

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