Big Four accountancy firms plan for forced break-up [FT]
As the drums for breaking up the Big 4 in favor of audit-only firms beat louder, it’s been interesting to read about the contingency plans they’ve been exploring behind the scenes:
PwC said it had “a documented business continuity plan covering a range of scenarios that could threaten the existence of the firm”. EY said: “Working alongside regulators and standard setters, the profession can evolve to best serve business, investors and stakeholder needs.”
This doesn’t mean they think audit-only firms are a good idea. KPMG’s Bill Michael points out that “There will still be big, complex, hairy companies around the world [even after a break-up].” Even Grant Thornton, who decided that it was done with FTSE 350 audits earlier this year said, “We fundamentally do not believe that this is the solution to the existing systemic issues in the audit market.”
It’s hard to disagree. The biggest and hairiest audit-only firm would still struggle to get comfortable forming an opinion on sprawling companies like AIG or General Electric.
But Big 4 audit firms keep screwing up in spectacular fashion. They abdicated their duty to the investing public long ago for the warm comfort of their wealthy corporate clients, with virtually no accountability. This would all be fine if they just dropped the pretense of integrity and objectivity. Yes, breaking up would be the Big 4 would be a bitter pill to swallow, but it increasingly looks like the best medicine for everyone to take.
Season Tickets? Steak Dinners? Small Firms Rethink Client Events After Losing Tax Break [WSJ]
The heyday of lavish entertainment expenses may be over thanks to the new tax law; at least for small businesses. Large corporations will make up the lack of deduction with their new low tax rate, but small companies that are typically organized as pass-throughs aren’t so lucky:
“How do you justify to your board of directors that you are incurring expenses that are nondeductible?” said Mark Olander, CEO of TaxAudit , a tax-audit defense firm near Sacramento that opted not to renew season tickets for the Kings and canceled plans to buy season tickets to the Angels and the Anaheim Ducks hockey team. “I have tried it in the mirror—and can’t even do it with a straight face.”
BKD buys part of Grant Thornton’s Wichita practice [AT]
GT is sending one partner and “16 other professionals” to BKD in exchange for a bag filled with cash and two accountants to be named later. Okay, of course not. They didn’t disclose the terms. But I kinda wish these transactions were described like baseball team trades.
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From the archives: ‘Dear friends at the FASB: I am concerned that you good folks have lost touch with reality’; see also: So Who’s the GAASMAN?
In other news:
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- All of Mugshots.com’s alleged co-owners arrested on extortion charges
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Egyptian accountants predict improved business after chaos [