• Accounting News Roundup: India Bans PwC for Two Years Over Satyam Fraud | 01.11.18

    By | January 11, 2018

    India Bans PricewaterhouseCoopers From Auditing Listed Firms for Two Years [WSJ]
    The Securities and Exchange Board of India banned PwC affiliates from auditing listed companies for two years over the $1 billion Satyam fraud (India’s Enron, if you prefer). As you may recall, PwC partners were sentenced to jail for this debacle, but the firm has maintained that “its accountants were duped” and “is confident it can reverse the order in court.”

    The Big Three [Reuters/Breakingviews]
    A column from Una Galani suggests that India’s ban of PwC “might also prompt multi-national companies in India to dump the auditor in other jurisdictions too, just to make it easier to file their global accounts.”

    Apple Could Get a $4 Billion Boost From Tax-Law Quirk [Bloomberg]
    In what appears to be a stroke of dumb luck (or savvy lobbying), companies, including Apple and Microsoft, whose fiscal years began before January 1 (when the new tax law took effect) “get an extra chance to reduce foreign cash they’ll accumulate this year — which they can do by distributing cash dividends to their U.S. parents before tallying up what’s left to be taxed.” One tax law professor stated the obvious: “Are there planning opportunities? Yes, most likely.”

    Elsewhere in Apple taxes: UK squeezes extra £136m tax payment from Apple

    I.R.S. Paid $20 Million to Collect $6.7 Million in Tax Debts [NYT]
    Not too good, man. Taxpayer advocate Nina Olson also reported, “private contractors in some cases were paid 25 percent commissions on collections that the I.R.S. made without their help.”

    Audit committees will be dealing with new accounting standards and tax reform this year [AT]
    A couple of KPMG reports state that, yes, members of the junk drawer committee will stay busy with revenue recognition, tax reform, and cybersecurity, among the usual stuff.

    Previously, on Going Concern…

    Greg Kyte’s Exposure Drafts cartoon showed that you can’t run from the billable hour.

    In Open Items, Updated PCAOB Staff Guidance on Determining Auditor Tenure

    From the archives: Deloitte Resents the Depiction of Its Independent Review Foreclosure Work as “Story Time”

    In other news:

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    See something we missed? Have a tip, correction, comment, or complaint? Email us at [email protected].

    • Big4Veteran

      Reminder… not too long ago, PWC was the result of a merger between the 5th and 6th largest of the “Big 6” accounting firms, and the resulting Goliath firm had quite a bit of distance between itself and the next largest firm. But PWC never really repaired or addressed the problems that led the two predecessor firms to be the 5th and 6th largest of the Big 6. And now here we are. PWC has already been overtaken in terms of size/revenues. The challenges continue to mount.

      • AccountantExtraordinaire

        This is such a misleading statement that’s clearly trying to imply that there’s some sort of organizational issue at PwC that makes it somehow worse without actually saying what those things are (and the reason is because there’s nothing that makes PwC worse than any of the other Big 4). First, let’s break down why your statement is misleading:

        1. “not too long ago” – The merger happened in 1998. It’s 2018. The merger happened two decades ago . I would call that quite a long time ago in this context. Most of the winter interns who are filing into the Big 4 right now to help out with busy season work were probably born in or after 1998. Given high turnover rates in public accounting virtually 100% of the employees who work at PwC never worked for a legacy firm, they only know PwC.

        2. “the resulting Goliath firm had quite a bit of distance between itself and the next largest firm” – The merger was so long ago that I’m actually even having a difficult time finding historical revenue numbers dating back that far on the internet. But based on what I can find on google, PwC’s global revenues for FY1999 were $17.3 billion (See: http://ww2.cfo.com/accounting-tax/2000/05/breaking-up-the-big-5/). KPMG’s global revenues for FY1999 were $12.2 billion (See: http://www.referenceforbusiness.com/history2/91/KPMG-International.html). I’m assuming that Deloitte and EY were somewhere in between $12.2B and $17.3B in 1999. That’s a fairly tight range, not nearly the chasm that you’re trying to make it out to be. If anything PwC seems to have widened the revenue distance between themselves and KPMG (and likely EY) as 2017 Big 4 revenues were: $38.8B – Deloitte, $37.7B – PwC, $31.4B – EY, and $26.4B – KPMG. The reason why Deloitte has grown faster than the other three has been well documented and largely attributed to the fact that they didn’t sell off their advisory arm after the Enron collapse and SOX was passed while the other firms did and had to rebuild their advisory arms later.

        3. “But PWC never really repaired or addressed the problems that led the two predecessor firms to be the 5th and 6th largest of the Big 6.” – First of all, I don’t understand the implication that just because two firms are the smallest in a group of the largest firms that there’s something necessarily wrong. Second of all, what were these problems that you’re implying they had. Third of all, I can’t find revenue numbers dating all the way back then so I can’t even validate this claim. Lastly, you’re leaving out the fact that they were the smallest because other firms had already merged. The Big 4 did not start off as the Big 6 – they started off as the Big 8. Ernst and Young and Deloitte as we know them today were both the results of mergers of Big 8 firms in 1989 leaving the Big 6. I don’t understand why you’re not critiquing these firms for having been combinations of the smallest firms to then become the largest firm? All of those firms merged and then were shortly overtaken in term of size/revenues by PwC.

        4. “And now here we are. PWC has already been overtaken in terms of size/revenues.” – And now here we are 20 years later and starting off in a fairly tight revenue range from 20 years ago, PwC has widened the size/revenue gap between them and two of the other firms and one of the firms has recently passed it largely on the strength and growth of it’s non-accounting services in a post-SOX world.

        Anyways, I hope I broke this down simple enough for you to understand why your post is misleading. I’m really curious still though if you could elaborate on the problems that PwC never addressed from the merger twenty years ago that are still lingering and causing mounting challenges lol. Please, humor me.

      • Ron Burgundy

        The dude above called you out, bro.

    • AccountantExtraordinaire

      Big4Veteran’s comment is entirely misleading. It’s clear that he/she is trying to imply that there’s some sort of organizational issue at PwC that makes it somehow worse than the other Big 4 firms without actually saying what those things are (and the reason is because there’s nothing that makes PwC worse than any of the other Big 4). First, let’s break down why the statement is misleading:

      1. “not too long ago” – The merger happened in 1998. It’s 2018. The merger happened two decades ago . I would call that quite a long time ago in this context. Most of the winter interns who are filing into the Big 4 right now to help out with busy season work were probably born in or after 1998. Given high turnover rates in public accounting virtually 100% of the employees who work at PwC never worked for a legacy firm, they only know PwC.

      2. “the resulting Goliath firm had quite a bit of distance between itself and the next largest firm” – The merger was so long ago that I’m actually even having a difficult time finding historical revenue numbers dating back that far on the internet. But based on what I can find on google, PwC’s global revenues for FY1999 were $17.3 billion (See: http://ww2.cfo.com/accounti…. KPMG’s global revenues for FY1999 were $12.2 billion (See: http://www.referenceforbusi…. I’m assuming that Deloitte and EY were somewhere in between $12.2B and $17.3B in 1999. That’s a fairly tight range, not nearly the chasm that you’re trying to make it out to be. If anything PwC seems to have widened the revenue distance between themselves and KPMG (and likely EY) as 2017 Big 4 revenues were: $38.8B – Deloitte, $37.7B – PwC, $31.4B – EY, and $26.4B – KPMG. The reason why Deloitte has grown faster than the other three has been well documented and largely attributed to the fact that they didn’t sell off their advisory arm after the Enron collapse and SOX was passed while the other firms did and had to rebuild their advisory arms later.

      3. “But PWC never really repaired or addressed the problems that led the two predecessor firms to be the 5th and 6th largest of the Big 6.” – First of all, I don’t understand the implication that just because two firms are the smallest in a group of the largest firms that there’s something necessarily wrong. Second of all, what were these problems that you’re implying they had. Third of all, I can’t find revenue numbers dating all the way back then so I can’t even validate this claim. Lastly, you’re leaving out the fact that they were the smallest because other firms had already merged. The Big 4 did not start off as the Big 6 – they started off as the Big 8. Ernst and Young and Deloitte as we know them today were both the results of mergers of Big 8 firms in 1989 leaving the Big 6. I don’t understand why you’re not critiquing these firms for having been combinations of the smallest firms to then become the largest firm? All of those firms merged and then were shortly overtaken in term of size/revenues by PwC.

      4. “And now here we are. PWC has already been overtaken in terms of size/revenues.” – And now here we are 20 years later and starting off in a fairly tight revenue range from 20 years ago, PwC has widened the size/revenue gap between them and two of the other firms and one of the firms has recently passed it largely on the strength and growth of it’s non-accounting services in a post-SOX world.

      Anyways, I hope I broke this down simple enough for you, Big4Veteran, to understand why your post is misleading. I’m really curious still though if you could elaborate on the problems that PwC never addressed from the merger twenty years ago that are still lingering and causing mounting challenges that the other Big 4 do not face lol. Please, humor me.

    • keepin_it_real
    • AccountantExtraordinaire

      I don’t know why they keep removing my comment, this is the third time that I’m having to post it: Big4Veteratn’s comment is such a misleading statement that’s clearly trying to imply that there’s some sort of organizational issue at PwC that makes it somehow worse without actually saying what those things are (and the reason is because there’s nothing that makes PwC worse than any of the other Big 4). First, let’s break down why your statement is misleading:
      1. “not too long ago” – The merger happened in 1998. It’s 2018. The merger happened two decades ago . I would call that quite a long time ago in this context. Most of the winter interns who are filing into the Big 4 right now to help out with busy season work were probably born in or after 1998. Given high turnover rates in public accounting virtually 100% of the employees who work at PwC never worked for a legacy firm, they only know PwC.
      2. “the resulting Goliath firm had quite a bit of distance between itself and the next largest firm” – The merger was so long ago that I’m actually even having a difficult time finding historical revenue numbers dating back that far on the internet. But based on what I can find on google, PwC’s global revenues for FY1999 were $17.3 billion. KPMG’s global revenues for FY1999 were $12.2 billion. I’m assuming that Deloitte and EY were somewhere in between $12.2B and $17.3B in 1999. That’s a fairly tight range, not nearly the chasm that you’re trying to make it out to be. If anything PwC seems to have widened the revenue distance between themselves and KPMG (and likely EY) as 2017 Big 4 revenues were: $38.8B – Deloitte, $37.7B – PwC, $31.4B – EY, and $26.4B – KPMG. The reason why Deloitte has grown faster than the other three has been well documented and largely attributed to the fact that they didn’t sell off their advisory arm after the Enron collapse and SOX was passed while the other firms did and had to rebuild their advisory arms later.
      3. “But PWC never really repaired or addressed the problems that led the two predecessor firms to be the 5th and 6th largest of the Big 6.” – First of all, I don’t understand the implication that just because two firms are the smallest in a group of the largest firms that there’s something necessarily wrong. Second of all, what were these problems that you’re implying they had. Third of all, I can’t find revenue numbers dating all the way back then so I can’t even validate this claim. Lastly, you’re leaving out the fact that they were the smallest because other firms had already merged. The Big 4 did not start off as the Big 6 – they started off as the Big 8. Ernst and Young and Deloitte as we know them today were both the results of mergers of Big 8 firms in 1989 leaving the Big 6. I don’t understand why you’re not critiquing these firms for having been combinations of the smallest firms to then become the largest firm? All of those firms merged and then were shortly overtaken in term of size/revenues by PwC.
      4. “And now here we are. PWC has already been overtaken in terms of size/revenues.” – And now here we are 20 years later and starting off in a fairly tight revenue range from 20 years ago, PwC has widened the size/revenue gap between them and two of the other firms and one of the firms has recently passed it largely on the strength and growth of it’s non-accounting services in a post-SOX world.
      Anyways, I hope I broke this down simple enough for you to understand why your post is misleading. I’m really curious still though if you could elaborate on the problems that PwC never addressed from the merger twenty years ago that are still lingering and causing mounting challenges that the other Big 4 do not face lol. Please, humor me.