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November 30, 2022

Accounting News Roundup: Big 4 Breakup Speculation and Preparing for a Trump Tweet | 02.14.17

Big 4 breakup speculation

Jim Peterson writes about the possibility of any or all of Big 4 spinning off their advisory practices and, give the current state of things, it’s probably as likely to happen as it is not likely to happen. You see, there’s regulatory pressure due to the conflicts of interest between advisory and the assurance practices, but also, JP writes, a lot of internal pressure:

It is, to say, not difficult to picture a quorum of unhappy non-Audit partners, delivering ultimata to their leaders that demand structural revisions to compensation packages and promotion incentives and organizing documents. Meanwhile, other dissidents would be lawyering up and engaging teams of bankers to model the costs and opportunities of a practice line break-up or break-down.

If I were an advisory partner, I would tell anyone who would listen that the consulting business needs to be separated from the firm. Likewise, if I were an audit partner, I’d tell the consulting group to STFU about how special they are and, yeah, “Maybe you should go off on your own!”

In my imagination, these heated moments are going on constantly in the modern Big 4 firm. But, for the assurance practice, going at without the consulting business could be dangerous. Peterson estimates that the financial “tipping point” for an audit and tax Big 4 firm (i.e. a liability finding that threatens the firm’s existence) would be less than $1 billion, not an unlikely sum in today’s litigation environment.

Business under Trump

It’s 2017 and Donald Trump is president. That will never not sound strange and it also means that running a business is stranger than ever because if the POTUS wants to tweet about how awful or un-American your business is, he can and will do that. As a result, we now have this:

Companies across the country are drafting plans for “war rooms” to address a surprise presidential tweet, and strategists say some are exploring strategically placing ads on MSNBC’s “Morning Joe,” CNN and “The O’Reilly Factor”—programs and networks from which Mr. Trump has often appeared to draw inspiration for tweets. Others have begun aggressively promoting previously announced job creation numbers in an effort to head off any criticism.

Since Big 4 firms have been bragging about their job creation numbers for quite a few years now, I’m sure they have their “Trump response” fully scripted.

Previously, on Going Concern…

People have busy season problems.

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