I’ve had some interesting comments to my posts about the awarding of TARP work to EY and PwC and my post yesterday on why the Big 4 deserve some blame for the “financial crisis.”
“How does an audit firm like PwC, one that’s really not a player, a dominant financial services industry expert in the past”
They are the 3rd or 4th largest auditor of financial services IN THE WORLD! And they are “not a player”.
This post is a joke, right? Please tell me it is a joke, and the real post is coming soon. “
“So PwC, as the 3rd largest auditor of the financial services sector in the world, is “not a player”? Using your logic, Toyota is not a player in the auto manufacturing business. Coors is “not a player” in the US beer market. Apple is “not a player” in the computer industry.
Could you please explain to me, since I can be dense occasionally, how 3rd largest in the world, with 20% market share, is “not a major player”?
“FM: Being # 3 or # 4 in a four horse race is not really being in the race in my opinion, especially given the level of specialized knowledge that auditing the financial services industry requires. We all know that no one but the Big 4, for the most part, audits these global financial services firms.”
Commenter: That was the most ridiculous statement you have ever put into this blog. I have a feeling there are 32480329480234 firms out there that would LOVE to have PwC’s market share, but maybe I am wrong. I doubt it, though. FM, you have really been trashing PwC lately and for no apparent reason. Something tells me that you had a favorite in the race to get the TARP work and when PwC won it rather than Deloitte or KPMG, you got angry and decided to bash PwC and the selection process. IMO, if PwC’s market share is smaller than the rest of these firms, they have less of an opportunity to be biased. Also, KPMG, Deloitte, and E&Y all lost more clients than PwC during the “financial crisis”, and PwC ended up picking up more clients than the rest. You say this makes them a bad candidate, I say this may possibly mean, they are better than their competition.
Let me address a couple of the statements in these two comments, again.
My contention is that PwC, in particular, given their historic smaller market share of the financial industry audit clients compared to the rest of the Big 4, most likely did not and still do not have the numbers or expertise in as large a number or in the depth and breadth as needed for the new bigger and more risky audits. In addition, they did not prove themselves up to the job with the clients they did have, namely Northern Rock, Freddie Mac, and AIG, in my opinion.
If they now suddenly have more than enough, in numbers and expertise, to meet the needs of all of the bigger, more risky, and more complex clients, let’s see it. They did not reach a bigger share of FS assets audited now because they were chosen to be the best, but because JPM and B of A bought other firms. They inherited it and I question whether they are up to the job yet or ever could be.
I do not feel I am “trashing” PwC disproportionately in this case. The title of the post is why “the Big 4” are to blame for the crisis and in the post about TARP, I mentioned the faults of both PwC and EY. Frankly, there is no Big 4 firm that would have been without conflict. I have no favored firm, to say the least. The TARP contract award process has no transparency and the Treasury has no monitoring process to insure that conflicts are identified and independence is maintained. None are without doubt in terms of necessary expertise. As 7:13 said, PwC got the additional FS assets to audit because firms audited by EY, KPMG and Deloitte “suddenly” failed. Not a good advertisement for them either.
In the end, it is hard to feel reassured that TARP, or any other audits by any of the firms, in particular PwC, is in good hands when the information about who is working on TARP, for example, is redacted and partners don’t sign audit reports. Let’s see the names. Let’s check their bios, education, licenses and certifications, client history, and their history with law enforcement and regulatory agencies.
If PwC or EY wants to show they have the best folks in the business on the job, then show their faces. And if anyone else wants to continue to disagree with my contention about any of the firms’ expertise or PwC’s level of staffing and expertise in FS, let them provide their data, with the firm’s or their name on it.
Unless or until this happens, I stick to my opinions.