Tuesday, March 24, 2009

31 More Years-5?

"Auditors will lobby the UK government for a statutory requirement that limits their liability after the current operational system has been effectively blocked by US regulators. ... But the US [SEC] has now indicated to the UK government that it will not accept any limited liability agreements by British companies who are also registered with it, a list which includes many of the biggest UK companies. ... 'This is the door being slammed shut in reality,' said Peter Wyman, global director for public policy at PWC, who added that he did not consider it would be a 'huge shift' to make UK policy statutory. ... SEC opposition has focused on the negotiation required between auditors and company directors to agree to limits. Officials fear this compromises independence, which would not be the case if the agreements were mandatory. ... Officials fear market chaos should one of the Big Four collapse as suddenly as Arthur Andersen did, leaving companies scrambling to find a new auditor", Jennifer Hughes at the FT, 11 March 2009.

More Big 87654 snake oil. CPA liability limits are what the capital markets don't need. If Big 87654 work is bad now, consider how much worse it will get with liability limits. I have long advocated repealing 1995's Litigation Reform Act to increase CPA liability for bad audits. If the officials are concerned about a Big 87654 firm collapsing, I say bust 'em up into the not so big 40. We now have CPA firms which are TBTF just like banks! Wonderful. We see how vigorously the TBTF banks are regulated.

5 comments:

Anonymous said...

It seems odd that so little attention is paid to the failure of the auditors in this crisis...

Same with the TBTF banks... the story line that an odd confluence of events just happened! Wow and those smart people were caught off guard...

Too many smart people who did nothing as our system became corrupt...

Bust em all up...

Independent Accountant said...

Anonymous:
Among the few to throw brickbats at the CPAs is Bloomberg's Jonathan Weil. I refer to him in my 4 February 2009 post. I assure you, there is no major accounting scam that is not known to the Big 87654.

winged unicorn said...

oh that's funny! the Big 87654. but why stop stop there? let's go for the gusto: Big 3-2-1-0!
since the prestigious firms have conducted themselves so honorably, so much to the utmost of their abilities [and here i comment on those who set policy, not the beleagured, hardworking, long suffering grunts] always following the spirit AND the rules of GAAP, maybe it's time to decentralize and put size limits on firms.

okay, fine, i know that's ridiculous, impractical, small firms just can't handle certain tasks, don't have the manpower, insight, erudition, would reduce the overall quality of the profession [pauses. or would it?] certainly limit the scope of experience of young'uns, but maybe...

as for scams, 'there is nothing new under the sun'

Sed quis custodiet ipsos custodes?

Independent Accountant said...

WU:
While small firms can't audit very large SEC registrants, there is no reason not to bust up the Big 87654. I estimate only 1,000 to 2,000 of the 17,000 SEC registrants are too large to be audited by say, a firm the size of BDO Seidman or Grant Thornton.

As to "insight and erudition", I assume you're being facetious. Those qualities reside in the mind. One CPA armed with appropriate reference materials can do any research a Big 87654 firm's thousands can do.

winged unicorn said...

well duh, Big Brother, of course i was being facetious.

even a non-CPA, armed with the ability to research, read and reason, can formulate a good argument for almost anything. and a REALLY smart person [such as myself] knows when her ability stops and when to consult big guns, such as you.

we have seen the downfalls of monopoly.

the ecomonies of scale aren't.

if you can't dazzle them with brilliance, baffle them with BS.