Wow! The Big 4 and Iraq
How did I miss this? Accounting Web has a special series on the Big 4 and Iraq. Part 1 was published in November 2007 and Part 2 just yesterday.
It’s fascinating reading.
I’ll be commenting later…
Ernst & Young had rushed to open a Baghdad office, of which it made much political capital, full of optimism for the new Iraq. Back in the US, it was awarding entrepreneurial awards to some of the private security companies working for the CPA (one of which went to Custer Battles, was later dogged by accusations of illegal profiteering). Its first contract, for the Debt Reconciliation Office, was a non-controversial one which saw it helping to implement US foreign policy on Iraqi debt.
Contrast this with KPMG, still working largely out of its Bahrain office, which found itself working for the IGC and the out-of-favour Chalabi, and afterwards for Kofi Annan’s UN, which was even less popular with the US government. In retrospect, given the political landscape, KPMG may have been drinking from a poisoned chalice. Within two years, the DFI audit was quietly handed over to Ernst & Young (who, it should be said, continue to express grave concerns).
The other two Big Four firms have taken different approaches. In the US, Deloitte’s public relations people have been keen to distance themselves from the country. Officially, “neither Deloitte Touche Tohmatsu nor any of its member firms do business in Iraq,” although the firm’s website has previously suggested otherwise. Meanwhile, the biggest and most profitable of the Big Four, PricewaterhouseCoopers, has remained conspicuous in its absence.
Perhaps PwC has decided that auditing in Iraq is more trouble than its worth. The former head of Iraq’s Supreme Board of Audit (SBA), Ihsan Karim, would doubtlessly agree, if he was still alive. The CPA appointed Karim to head the Iraqi side of the oil-for-food investigation alongside Ernst & Young. After the CPA pulled out Karim lasted for five days before being assassinated.
Iraq is a country where auditors can know far too much.
And in all seriousness, at this time where there is not even political or security stability, why would you even need an opinion on financial statements?
Imagine being the partner who has to issue a qualified opinion for a company that has links to some not so savory characters…
Not a position I would want to be in.