Don’t get me wrong… It’s not easy for anyone to keep it all straight.
In my previous post on PwC’s relationship with Aramark as a vendor for its cafeteria, in response to a commenter who took issue with my contention that PwC and not the owner of their Madison Avenue building, was the real vendor, I quoted:
“The independence issue is already there, if Aramark is PwC’s vendor. Section 602.02.b of the Codification of Financial Reporting (“the Codification”), states that materiality is not a consideration in the case of a direct financial interest.”
Further, “direct and material indirect business relationships, other than as a consumer in the normal course of business, with a client … will adversely affect the accountant’s independence with respect to that client. Such a mutuality or identity of interests with the client would cause the accountant to lose the appearance of objectivity and impartiality in the performance of his audit because the advancement of his interest would, to some extent, be dependent upon the client.”
PwC has to manage their involvement in this contract to make sure they are not getting any better deal from Aramark in exchange for lower fees to Goldman Sachs, for example.
The operative terminology for independence standards when the vendor is also an audit client is:
...we have attempted to set forth in proposed rule 2-01(f)(11) a workable definition of “consumer in the ordinary course of business.” In general, an accountant acts as a “consumer in the ordinary course of business” when the accountant buys “routine” products or services on the same terms and conditions that are available to the seller’s other customers or clients.\153\
Citigroup offloads Diners Club
Citigroup’s chief executive moved on Monday to streamline the troubled financial services conglomerate by selling the Diners Club International credit card network to Discover for $165m.
The decision to sever the 27-year tie with Diners comes as Vikram Pandit and his lieutenants conduct a review that could lead to up to 25,000 job losses across global operations, say people close to the situation.
So it’s a good time to take a look at the relationships between the Big 4 and the major travel and entertainment card companies. This business is big, as we all know auditors and consultants travel a lot! And EY, for example, has been in trouble before for not having the right controls in place to make sure there were no violations of independence rules, either in fact or appearance.
Travel Card Audit and Big 4 Business Relationships
With four big firms, and a few next tier firms, why do the Big 4 persist in having a travel and entertainment card relationship with a client?
Could it be that there is still some advantage to auditing the company that provides your card? Or using the card of your audit client?
When I left PwC, it was necessary to pay the balance on my American Express Card immediately, even though I would be waiting an extended period of time to get the reimbursement from PwC for any outstanding charges. As a matter of course and good policy, PwC makes sure that all charges are in and does a more thorough hands-on review of any final travel and expense reimbursement requests. They have your last paycheck and any severance payment (in most states but not in all locations) that can be offset, if any expense reimbursement request turns out to be outside of policy.
My American Express corporate card was canceled immediately and unable to be used as of my last day of employment, as it should be. However, PwC paid American Express directly about two months later when they completed their review for the final amounts I had submitted through the expense reimbursement system during my last week of employment.
PwC then conducted another two-month long process to check again that there were no outstanding expense reports, that they were satisfied I had fulfilled all my financial obligations, and that there was no further reason why I could not receive the check for the credit balance, on my American Express card, the one in my name, that I had to pay off when I left to preserve my credit rating.
I finally got the approval, FROM PWC.
Can anyone say that there is not more than a symbiotic relationship between the Big 4 and their T&E card vendors?