The Full Service Firm: McKenna Comments For Canada’s The Bottom Line On Legal Services
Jeff Buckstein at Canada’s The Bottom Line published a feature back in October about the largest public accounting firms’ expansion into legal services. We’re not talking about due diligence, corporate investigations and e-discovery activities but the inclusion of full-fledged law firms into the networks that will compete with traditional firms in the UK, China and other places where they are now allowed.
My feelings about the firms’ re-expansion of their advisory, non-audit arms has been well documented here, in other publications and in my speeches. PwC’s 100+ audit clients on the Luxembourg tax avoidance list proves that audit firms can’t, and defiantly won’t, keep their grubby mitts off the hundreds of millions, probably billions, they can charge for services that are actually prohibited.
Are auditors the only market eunuchs in the capitalist system? They want us to believe they alone are immune from the power of financial incentives such as lucrative consulting engagements that overshadow the fees for their public duty as the auditor.
Lack of comprehensive enforcement by the PCAOB, SEC and UK regulators allows systematic and systemic violations of auditor independence to continue.
Now that auditor regulatory regimes in the US and UK are moving farther and farther apart on issues such as audit firm rotation, the provision of tax services and other advisory services to audit clients and identification of the audit partner, it’s clear to me that regulatory arbitrage by multinationals and their audit firms will grow. The impasse in China over PCAOB inspections and audit workpaper access is another example of the ongoing intransigence by Big Four audit firms and their clients to do the right thing for investors and the capital markets.
No one has the guts to solve the China issue the right way—by de-registering un-inspectable auditors and de-listing companies with invalid audits. There is no effective umbrella audit regulator that can, or will, stop any of it.
I’m quoted extensively in the Bottom Line piece. Here’s a PDF of the article.