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Big 4 Firms Performing Quite Well in the Self-Preservation Department

Posted on by Caleb Newquist

If you are able to find Google's homepage and have a couple of functioning digits, it isn't difficult to find news of Big 4 audit firms settling lawsuits over the past few years. Satyam. Countrywide. Bear Stearns. Sino-Forest. There are others. There will be more.

In the UK, regulators have been grilling the Big 4 over their oligarchy and the firms have consistently argued that the competition out there is fierce — especially amongst themselves. Along with the question of dominating the marketplace, the Queen's Competition Commission looked into professional negligence claims against the firms over the past ten years and found that they aren't what you might expect, as the FT recently reported: 

As part of its year-long probe, it found there had been few successful professional negligence claims worth more than £1m against UK auditors over the past decade, although it did not disclose details of these payouts, in order to protect confidentiality. 

While Deloitte derided this as an "incorrect conclusion" that "[was] not supported by the evidence," E&Y was little more like, "Yeah, you got us; BUT JUST YOU WAIT": 

Ernst & Young admitted that “the last eight years have been marked by relatively low levels of [professional negligence] settlements” but said that this trend was coming to an end amid “an increase in the volume of claims and indeed the size of claims”.

So the sky will fall at some point and since making payouts due to auditor failure, negligence, or good ol' incompetence is a cost of doing business these days, it should as no surprise that there are some deft strategies being used: 

Audit firms were also cushioned against the financial impact of slip-ups by a combination of ”captive insurance” – an in-house form of cover – and reinsurance, the Competition Commission added.
Of course, accounting firms cannot survive on insurance alone:
Jane Howard, head of professional liability at Wragge & Co, a UK-headquartered law firm, agreed that the legal climate for accountants had been relatively benign. “The Big Four are so well risk-managed,” she said, adding that English law was “really quite protective of auditors”.
Having the law on your side never hurts.
 

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Deloitte Employees Infesting Miami Condos with Their Green Dottedness

In case you hadn’t heard, Miami has been in the news this week. It is the new home of some rich dude who may or may not be the biggest egomaniac in sports.

HOWEVER! What’s more important is that we read that the decimated real estate situation in downtown Miami – you know, all those luxury condos on one bought – might be turning around and it’s due to, in no small part, to a plethora of Deloitte employees infesting the towers:

Brandon Klein has done what few Floridians can: go weeks without driving his car.

The 26-year-old tax accountant walks three blocks from his condominium tower on Biscayne Bay in Miami to his office at Deloitte LLP. On weekends, he and his friends hang out on the pool deck or share a cab to a local Irish pub.

He lives in Downtown, a neighborhood where young people are renting condos built during the 2004 to 2008 boom to attract second-home buyers. Thanks to the housing crash, Klein and two roommates pay about $900 a month each for an obstructed waterfront view, a wraparound balcony and access to a gym, spa and steam room.

“Five years ago you wouldn’t have kids fresh out of college living in luxury like this,” said Klein, sitting in front of the 24-hour concierge in the three-story lobby of his building at 50 Biscayne Boulevard, coordinating happy-hour plans by text message. His friends are concentrated in nearby Met I, which has 447 luxury units and a steakhouse on the first floor. They refer to the building as “Deloitte Dorm” because it’s home to so many employees of the accounting and consulting firm.

We understand that ‘BergBW has certain journalistic standards that prevent it from explaining the ‘Dorm’ aspect of ‘Deloitte Dorm’ so we’ll be glad to elaborate.

Chances are most of Green Bloods living in the Deloitte Dorm are around Brandon Klein’s age so it’s likely that there is activity going on that you would normally find at a national training. This means people passed out in the lobby, lots of awkward accountant sexual advances and the occasional drop-in by Barry Salzberg or some other “adult” to remind everyone that they are representing Deloitte.

In any case, if there’s a ‘Deloitte Dorm,’ then there are certainly other Big 4 buildings in the area which is a pretty sickening thought.

Miami’s Downtown Comes Alive as Condos Fill With Young Renters [Bloomberg BusinessWeek]