Category: Big 4

If it happens at a Big 4 accounting firm, we’re talking about it here.

Dennis Nally: PwC’s Credibility with Our Clients Is Doing Just Fine, Thankyouverymuch

Awhile back we told you about PricewaterhouseCoopers Global CEO Dennis Nally admitting that the PwC brand had been damaged because of the whole Satyam fraud.

DN has done another interview with the Indian press and he says despite this litng is on the up and up in India for PwC. The long/short of it is that Dennis & Co. are going to keep giving their clients the P. Dubs experience now and forever.

Pretty wide range of questions but we’ve presented the highlights for you.


Was the PwC Magic 8ball broken?

Q: When you look back at it do you think you could have avoided all that happened?

A: I don’t know if we could have avoided it. As we all know this was probably one of the most significant frauds that suddenly has taken place here in India but even in the global market place. So I do not know how you avoid that type of situation.

Where was the P. Dubs swagger when the shit hit the fan? Did you realize that everything was f’d and didn’t know what to do?

Q: [T]he firm didn’t seem to respond in a confident manner. The impression was that it didn’t know what it had been hit by. Do you think it could have been handled better?

A: I think with hindsight you can always do things better and that is part of learning and trying to deal with issues. But quite frankly this was a major event and of course it took us time to understand the pattern and what transpired.

In fact we are still learning and everybody is still learning. Now all the facts aren’t quite out yet but I think we are in the business of being out in the public and when something like this happens and it happens in a negative way, we are part of that. That is just a reality of being in a profession that we are involved with.

Why is this PwC’s fault?

Q: What role did the auditors have to play?

A: You are into an interesting debate and discussion because what is the role on a professional standards for the detection of a fraud. That is one of the areas that has been the focus not only on Satyam but a broader profession wide issue and we certainly welcome that debate.

I think there is an expectation out there in the public that auditors uncover every single fraud that they are involved with and that is not what professional standards call for but there is the public perception that that is what we are there to do. I define that as the expectation gap. If that is the expectation then we need to make sure that we are focused on the right kind of procedures, the right kind of standards, the right kind of reporting which is quite frankly really different than what we do today.

Will you stop all future frauds in India forever and ever and ever?

Q: Can you tell us if India will never see a Satyam again?

A: I wish I had a crystal ball but I don’t. As I said when you have a situation like Satyam or a major fraud I suspect somewhere in the world of corporate reporting, you are going to see another situation like that. Our job is to make sure we are doing everything we can possibly do consistent with the standards that are out there to ensure that we play our role in that process to avoid them.

The new India managing partner came from Singapore? You got something against Indians?

Q:But he has not come from India, you didn’t appoint him from the India firm – he was brought in from Singapore?

A: Gautam is originally from India which is great so it’s little bit of coming home programme.

Q: But it’s not a vote of confidence on the India management?

A: It is not. This is all about ensuring that we get the very best talent to focus on an important market like India and that’s exactly what we have done.

You let everyone down. Speak to them!

Q: A word to all those investors who felt disappointed with PriceWaterhouseCoopers for not alerting them to what was going on in Satyam. What is your message to them today?

A: Whenever we have situation like this, right or wrong, whatever standards are we are part of that and for that we regret what has happened. But this firm is about quality. It’s about doing the right things, it’s about being here for the investor community and we are very much focused on that.

Satyam fiasco has not dented credibility with clients: PwC [Money Control]

(UPDATE) John Veihmeyer to Succeed Tim Flynn as Chairman of KPMG’s U.S. Firm

UPDATE/Correction, Wednesday 3.24.10 – Previously, headline stated that John Veihmeyer was succeeding Tim Flynn as Chairman and CEO. John V. has actually been the U.S. CEO since 2008. Sorry JV, for not giving you credit there.

The suspense is over. Johnnie V. has been serving as th the U.S. Firm since 2005 and he has the full confidence of TF, “There is no finer individual to lead the U.S. firm and build upon the progress that has been made over the last five years…John is equally passionate that KPMG continues to be a great place for our people to build their careers, in a culture that embraces diversity.”

JV will be succeeded by Henry Keizer in the Deputy Chairman role. Hank will also be the U.S. firm’s Chief Operating Officer. Timmay is also excited for Keizer Soze’s promotion, “His leadership and professionalism will be vital to ensuring the firm meets the challenges and capitalizes on the tremendous opportunities ahead…he has championed the use of technology and off shoring to enhance our operational effectiveness and efficiency in an increasingly competitive marketplace.”

Tim will be focusing on his roles as the Chairman and Senior Partner of Klynveld International, dashing our wishes for him to be the next Secretary of the Treasury. He was “strongly endorsed” by the Global Board to get down to business in this “unprecedented global economic and regulatory environment.” You can probably plan on more Davos interviews next year, chatting up royalty, caddying, etc.

I am extremely pleased to announce that the partners have ratified the election of John Veihmeyer as Chairman and CEO, and Henry Keizer as Deputy Chairman and COO, of the U.S. firm. John and Henry will assume their new responsibilities on June 10, 2010, when my term ends as U.S. Chairman. John and Henry bring strategic insight, deep leadership skills and extensive experience in serving clients to their new roles.

While it was a difficult decision for me not to continue in my role as Chairman of the U.S. firm, it has become increasingly clear to me that my additional role of Chairman and Senior Partner of KPMG International requires a full-time commitment. Last week, the Global Board strongly endorsed that I serve full time as Global Chairman in this unprecedented global economic and regulatory environment and period of tremendous opportunity for our member firms and people.

Having the privilege to work side by side with John during our five-year term as Chairman and Deputy Chairman, I have seen first-hand his professionalism, leadership and commitment to KPMG, its people and clients. There is no finer individual to lead the U.S. firm and build upon the progress that has been made over the last five years.

In addition, Henry will bring a tremendous amount of operating experience and energy to the Deputy Chairman and COO role. His leadership and professionalism will be vital to ensuring the firm meets the challenges and capitalizes on the tremendous opportunities ahead.

John has served as Deputy Chairman of KPMG since 2005, and he brings a unique combination of skills and experience, across all aspects of our strategic priorities, to the role of chairman. John is equally passionate that KPMG continues to be a great place for our people to build their careers, in a culture that embraces diversity.

Henry comes to his new role after serving as U.S. Vice Chair, Audit since 2005 and Global Head of Audit since 2006. In these roles, he has championed the use of technology and off shoring to enhance our operational effectiveness and efficiency in an increasingly competitive marketplace.

John and Henry’s professional depth, integrity and commitment to our clients, partners and the people of KPMG will serve the U.S. firm well as we move forward. Please join me in congratulating John and Henry and welcoming them to their new roles.

In closing, there was never a day that I was not grateful and humbled by the opportunity to lead and work with the truly exceptional people of KPMG. I have been awed by your talent, proud of your accomplishments and appreciative of your dedication. It truly has been an honor to serve as Chairman of the U.S. firm for the last five years.

Thank you for all that you do every day to support our firm and deliver on our promise of professionalism to each other, our clients and the capital markets we serve.

All the best,

Tim

Big 4 Firms Are Planning for Your Exodus

For some time now, Caleb has been touching on the upcoming/ongoing/always-occurring exodus from Big 4 into the private sector. The obvious reasons for the change from public to private are obvious, but here’s a few for kicks:

• Bigger pay day (and potential growth)

• CPA requirements completed

• Actual work/life balance

&ill set transition to a new career

There are other reasons of course, but it is the ferocious combination of these that leads to the breaking point – low morale.


Going Concern received an email from a distraught and burnt out Big 4 auditor from the Southeast region:

The level of morale in the [XYZ] office is at an all time low. Discussion with low level staff, through managers, have yielded the same opinion of overwhelming expectations without the needed support from the firm. They want us to draw blood from a turnip, and they want it done better, faster, and with less resources than last year. This has caused everyone to start exploring options in the market. A vast majority have started fielding resumes and contacting recruiting firms. The select few who have made it past that hurdle are interviewing with no looking back.

Not to downplay what this auditor is saying (and I’m not), but this sounds like the unfortunate reality of many auditors working on smaller, non-public clients. You know, the not-as-sexy-as-ABC Bank but just as important to the firm’s bottom line. You won’t get tickets to the pro sport’s game, but thankyouverymuch for your efforts.

The reader goes on:

Primarily, people have expressed their interest in holding out any real intentions of leaving until promotions roll around in the later part of the summer. They’re hoping that maybe there will be some juicy 20% raise waiting for them, but the stark reality of a measly 5% raise is what they know is coming. Any fifth year Seniors who are waiting for the promotion to manager are just using it for resume purposes.

Our offices are already using under qualified second year staff at the Senior level, as well as retaining new managers in the Senior position because they are extremely understaffed at that level. This, in turn, is causing all of those people to take measures to leave perhaps after busy season and certainly after the insulting promotions come through in August.

It’s a matter of time before this individual (and half of their respective office) becomes another statistic that the Big 4 HR guru’s term “natural attrition.” From an HR perspective, here’s a loose idea of the attrition formula:

Fall 2010: 100 new hires

Fall ’11: 95 new hires become “2nd years”

Summer/Fall ’12: 88 2nd years promoted to senior staff, 70 seniors remain

Summer/Fall ’12: 2 years of public experience reached, 55 seniors remain

Summer/Fall ’13: 45 seniors remain

Summer/Fall ’14: 35 seniors remain

Summer/Fall ’15: 25 seniors remain; 15 promoted to manager, 10 remain on as seniors

Summer/Fall ‘XX: 10 senior managers are eligible for partner

The recession stunted this formula for every firm, as they were forced to make cuts, not only for cost cutting purposes, but also to keep their staffing formulas close to being in-check. But think about it – your firm expects this kind of turnover. They know it’s a matter of time before their hiring class is whittled down to 10% of its original size.

And in the case of the reader, their firm dropped the analytic ball 3-5 years ago. Had they better estimated the percentage of projected losses, there would be more seniors to handle the work.

Remember that time you felt bad about leaving? They’re waiting for you to do so.

Can the Month of March Get Worse for Ernst & Young?

Today in non-Lehman Brothers Ernst & Young news, the firm has been sued by a liquidator in Luxembourg just a few weeks after a Lux court ruled that individual investors couldn’t bring suits against UBS and E&Y. The suit seeks over $400 million in damages against the two firms. The Iriving Picard de Lux is Alain Rukavina, who filed the suit today.

BBW reports that “Rukavina is one of two liquidators who in December sued UBS and Ernst & Young over Access International Advisors LLC’s LuxAlpha Sicav-American Selection Fund, which once had $1.4 billion in net assets.”


A UBS spokesperson stated that this development was not unexpected and we’re sure that E&Y isn’t yawning at this news, chalking it up to fairly typical Monday.

So in case you’ve been in a coma for the last week or so, you’re probably aware that JT and Co. haven’t had such a great March. Anyone got ideas for how they turn all these frowns upside downs? Do Canadian Tuxedos become standard dress code M – F? Does Jimbo send everyone a complimentary pair of Timberlands? An E&Y Hitler video to lighten the mood? Suggestions are welcome.

UBS, Ernst & Young Sued by Madoff-Fund Liquidators [Bloomberg BusinessWeek]

Has the Post-Busy Season Big 4 Exodus Already Started?

Seems a tad early but with two major deadlines passed, it’s possible that the Spring 2010 exodus may have started.

From one Big 4 auditor, “[A]pparently the DC and/or Philly office just underwent some serious turnover – my [schedule] just got all kinds of fucked up and my performance manager’s explanation was that “we’ve had some turnover and you have been shifted around as a solution.” So that’s cool. And by cool, I mean WTF because there was no warning, and it seems to be changing every few hours now.”


Our source continues:

Not a clue just how much turnover or if it was limited only to the audit practice, and how the turnover took place (I’m assuming people are quitting, as that is what pretty much all anyone at my level can talk about lately), but it was enough that I just went from two normal-hours clients to five “plan on overtime” clients. (It was six clients last night, but it looks like it got switched up again this morning.)

If there’s one thing that may cause violence more than someone quitting in the middle of busy season, it’s getting assigned to a “plan on overtime” client in the second half of March.

It’s likely that the timing of people leaving is an office by office phenomenon as one of our New York sources said that people aren’t leaving but “everyone wants to, but that’s nothing new.”

So if people are heading for the exits in your office, forced or otherwise, let us know.

(UPDATE) Ernst & Young Doesn’t Care if You Missed Murray State Upsetting Vanderbilt

From an upset Ernster on the Left Coast:

EY Blocks all Websites with “sports” because of March Madness. People in my SoCal office are all ticked off. This sucks. First it was pandora and now it is sports websites. What is next? Lunch breaks? Bathroom breaks?


Music, sports, food, bodily functions. That seems like the right order, doesn’t it?

Since our source sounds pretty upset, this must not be an annual ritual for E&Y. It’s also not clear if this some kind of punishment for everyone showing up hungover today or if it is somehow Lehman Brothers related. Let us know if you’re blacked out at we’ll send you updates.

UPDATE, 6:43 pm: Turns out this was just temporary, THANK GOD:

It turns out there was an internal webcast about Lehman Bros so they shut down all sports websites during the webcast because it was interferring with the webcast. Sports websites are back up but there were a lot of people who were ticked off and went home to work.

Damn you Lehman Brothers! We knew it! So now the question is, what was said on the webcast? Anyone take copious notes?

KPMG’s Layoffs in Advisory May Have Made Room for Some Auditors

Happy Hangover Thursday, folks. Hopefully the green food coloring washed off easily this morning.

I was out networking with my Irish brothers last night in midtown New York, quite a few blocks north of my normal after-work locale. Second Avenue bars full of cold beer and burned out white collars, St. Patty’s Day was a welcomed Wednesday relief for those in busy season. The day was over, the night was turning late and, for once, shop talk was put on the back burner. That is, until I heard the phrase “Uncle Peat” used as the object of affection bitterness for a toast.

Obviously, I couldn’t resist.


DWB: “Are you guys auditors?”

Auditor 1: “Yeah, over at KPMG. Hopefully not for long, though.”

DWB: “Nice, nice. Moving on to better things?”

Auditor 2: “Hopefully.”

Auditor 1: “Not soon enough.”

A round of drinks later (toast to Uncle Peat not included) and these Irish-for-the-day gentlemen filled me in about an email circulating around KPMG’s NYC audit practice regarding a temporary rotation into the Transaction Services (TS) practice. TS specializes in mergers & acquisitions work and was — most likely — hit steeply by the rounds of the falling guillotine back in 2008 and 2009.

How does a practice that was hemorrhaging money and resources a year ago now have business blowing through the door at such a fierce rate? If you read anything beyond the usual busy season distractions, it’d come as no surprise to you that the markets are slowly picking up. But service firms typically lag in response, both on the positive (Woo-hoo, new business!) and negative (Sorry, this isn’t about you – this is about the numbers) sides of the equation. Nonetheless, Uncle Peat’s auditors should be leaping at this opportunity. A rotation out of audit can be refreshing, even in the quieter months of summer.

Did KPMG’s advisory shake up and realignment pay off? Is the firm’s leadership blowing smoke to perk up the down-trodden auditors currently drowning in busy season? Was a picture of a giant carrot on a string used in the email? If you received this email, I’d love to read the text. Last night’s informants promised to send it over, but they probably called in with emergency doctor “appointments” this morning.

KPMG Reinstating “Standing Ovation” Bonus Awards

Back in November 2008, KPMG suspended the highest level of its Encore bonus award, the Standing Ovation to “manage costs.” Since there is no shortage of exceptionalness at Radio City, the $500 awards were adding up so word came down that it was ixnay the tandingsay vationsoay.

The firm did keep its “Bravo” award that was good for $200 and replaced the five-hundo bonus with a $25 award and “thanks e-cards” that were way better than anything from Hallmark simply because Tim Flynn probably included a personalized message.

And you, simply, cannot put a dollar figure on that.


The most devastating part of the Standing O kibosh was that the trophies — which could easily qualify as a “blunt object” at a crime scene — were no longer handed out. These, understandably, are most coveted of all KPMG tchotchkes.

Well now, according to accountants familiar with the matter, the firm has reinstated the Standing Ovation for reasons that we can only speculate. It will be reserved for those Klynveldians that “go above and beyond” the call of their duties. Again, we can only speculate as to what this actually entails. Considering the fact that the hours you’ve been putting in for the last month or so have been expected, it may just mean that you have to try a little bit harder.

The reintroduction is being received tepidly, as one source told us:

Kinda meaningless to me. They don’t hand them out. Except for managers that want to get laid by younger staff.

Seconded by another source:

Just because they bring them back, doesn’t mean any partners plan on approving them. – “Oh, I nominated you for a standing ovation, but it didn’t get approved! It’s the thought that counts though, amirite?”

Another source saw it as too little, too late:

“Do they really think $500 is going to stop a mass exodus of [people] from leaving? Perhaps they should have thought about that when they didn’t give raises.”

Despite the vague qualifications for the award, it’s good to see TPTB reinstating the bonus for the sake of morale/bribery/empty hope. Now go get yourself one!

Jefferies Follows Select Comfort’s Lead, Dumps KPMG for Deloitte

So this makes two SEC clients lost for KPMG in as many days. Again, Jefferies had no disagreements with KPMG yada yada yada. Jefferies didn’t even receive a GCO like Sleep Number. However, KPMG did include this language for this year’s (i.e. December 31, 2009) audit opinion:

“As discussed in Note 1 to the consolidated financial statements, in 2009 the Company retrospectively changed its method of accounting for noncontrolling interests in subsidiaries and earnings per share due to the adoption of new accounting requirements issued by the FASB.”


BFD, right? Could Jefferies really be so bent of shape over that to make the auditor switcheroo?

The other point is — and maybe we’re making a mountain out of a molehill here — this is the second example of a non-standard auditor opinion from the House of Klynveld followed by clients kicking them to the curb for the clean scalped, mustachioed comfort of Deloitte.

One thing is for sure and that is that Deloitte is clearly on the offensive here after losing so many SEC clients last year. Still, we’re curious about a few things: 1) Is Big D going after KPMG clients specifically? 2) Is there a secret weapon being employed to woo these clients (e.g. Barry does a dead-ringer Dr. Phil impression during the presentation)? 3) Are KPMG clients upset about Tim Flynn stepping down as chairman? OR are they upset that the Radio Station is still camping out in Iran?

If you’ve got concrete knowledge, crackpot theories or just want to take a shot in the dark (since most of you are probably drinking by now) on this new and emerging (?) trend, fire away.

8-K [Jefferies]
10-K [Jefferies]
Jefferies Announces the Engagement of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm [Business Wire]

PricewaterhouseCoopers Shutting Down Orlando Tax Practice

Yesterday, PwC tax professionals got word that the firm is discontinuing tax operations from its Orlando office effective May 3, 2010.

Mario de Armas, the South Florida managing partner, explained that lack of business, “Orlando-based tax clients has declined, and we have been forced to import tax hours from other offices to keep our people busy,” and staffing challenges, “We have also faced a continued challenge around staff development in a primarily compliance environment,” lead to the closure of the practice.


The email states “We are committed to assisting each impacted individual with this transition,” although no details were given. The email also states that there will be no other Florida practices will be shut down, “To be clear, we have no plans to close any other practice areas in any of our Florida offices.” Emails to Mr de Armas and Jorge Gross, the Florida Tax leader were not returned. An email to PwC’s national press relations was also not returned.

This practice closure follows recent office closures by both Grant Thornton and Ernst & Young (“virtual” closure) in Greensboro, NC and E&Y closing its Manchester, NH office last fall.

If you will be affected by this closure, get in touch with us and we’ll continue to update you as we learn more.

Florida Colleagues:

We are constantly evaluating our client service delivery to ensure that our clients receive the best service possible and that our people are being offered opportunities for development and advancement. Over the past few years, revenue from Orlando-based tax clients has declined, and we have been forced to import tax hours from other offices to keep our people busy. A limited number of corporations are headquartered in Orlando, and while many of those corporations have been retained as audit clients, fewer have been tax clients. We have also faced a continued challenge around staff development in a primarily compliance environment, and more compliance work will be performed at the centralized Tax delivery center over time. As a result, the Firm has concluded that we will no longer have tax professionals located in the Orlando office effective May 3, 2010.

Knowing that we will be asked about this decision in the marketplace, it is important that we have a clear message to the market. From a strategy perspective, we believe that our distinctive footprint across the state of Florida makes us uniquely positioned to service our Orlando clients from our other offices, following the One Market concept.

This has been a difficult decision, and one that was reluctantly made after considering many factors. Our Tax professionals in Orlando have served our clients well. They have contributed in many ways to our market, and their efforts are valued and greatly appreciated. We are committed to assisting each impacted individual with this transition.

To be clear, we have no plans to close any other practice areas in any of our Florida offices. Please contact me or Jorge Gross, our Florida Tax Leader, with any questions you may have.

Thank you,

Mario