• Revenues Down, Expenses Up: An Analysis of Big 4’s Financial Situation

    By | June 25, 2012

    Ed. note: Continuing with our potential Going Concern freelancer submissions, this is the second from Bob Loblaw. In case you missed his first, you can find it here.

    The world of accounting has experienced unprecedented change in the past 10 years. Since the turn of the millennium, we’ve seen the fifth largest accounting firm in the world collapse, we’ve seen one of the largest companies in the world go bankrupt as a result of an accounting scandal, and we’ve seen the credit markets come to a grinding halt in 2008.  As the accounting scandals continue to pile up and the global economic markets continue their roller coaster ride, there are a few notable trends:

    • The factors underlying each of these events have become increasingly complex,
    • The regulatory response has become increasingly invasive and
    • Accounting firms are increasing the rigor in their own audit processes in order to cover their asses.

    So why do you care about this?

    To ensure that I don’t lose my reputation as a condescending dick, I’ll start with this illustration of how companies make money:

    Revenues
    (Expenses)
    Net Income

    Digging a little deeper in the context of a public accounting firm:

    Audit Fees
    Plus: Non- Audit Fees
    Revenue

    Expenses are much more complicated:

    Net income is then distributed to the partners.  

    The part most of us care about is “employee compensation”.  The data you will get from an internet search for “Big 4 compensation” is expansive to say the least. In fact, JDA was peddling a study just the other day. (By the way, Robert Half has a free one that’s probably just as good) However, in order to get a good understanding of what the future holds in terms of non-partner compensation, you need to consider the factors from a firm point of view.

    Remember what I said above the net income being distributed to partners?  Well the cold harsh truth is that the partners aren’t going to take a cut in their distribution.  This means that your revenues have to stay ahead of your costs.  Below is a summary of Big 4 revenue from 2007 – 2010:

    2004 cumulative revenue was $60 billion so you’re looking at a CAGR of 8% from 2004 to 2010. Not too shabby considering the 2008 market collapse.  However, this is a study based on firm-reported operating results from a source called “Big4.com”. I’m not suggesting that firms are misrepresenting their operating results, but accounting firms are private companies and can report whatever they want, and if anyone knows how to make bad numbers look good, it’s a bunch of accountants. So in an abundance of caution, let’s look at a third party study.

    In 2010, Audit Analytics completed a seven year analysis of audit and non-audit fees based on a comprehensive review of proxy fee disclosures for accelerated filers. What’s interesting about this study is that they compare audit firm fees as a percentage of the filer’s total revenue which gives you a sense of how fee growth compares with the public company growth.  The information below tells us that if anything, public companies are reducing the fees that they are paying public accounting firms:

    Now put this in context of what I opened up with. Audit effort has increased significantly over the past 10 years as a result of legislation, litigation, fraud, global credit market instability and a variety of other factors. What the chart above tells us is that the economic impact of this additional audit effort is not being passed along to the customers. So how are the partners still getting their distribution?  Well this is where it gets good.

    Before 2004, there used to be this thing called busy season.  In January every year we got an e-mail from management that said we were required to work at least 55 hours per week and we all said goodbye to our families and put our noses down until the end of March. Then in 2002 a couple of jackasses named Paul Sarbanes and Michael Oxley sponsored a debacle of a bill which would become the Sarbanes-Oxley Act of 2002. The Act reflected the fact that both of these Congressmen were life-long politicians and knew about as much about accounting as Ke$ha knows about nuclear physics. Our clients were quick to point out that they would not be covering the entire costs of this new legislation. And so it began… the auditing requirements grew by a lot, and the fees grew by a little. Before long, the concept of “busy season” was forgotten as most service professionals were working 55 hour weeks year around. Then in 2008, the proverbial shit really hit the fan with the global credit crisis hit and clients started cutting out any sort of non-required services.   And yet, it appears that global Big 4 headcount didn’t significantly move.

    As the firms continue their efforts to keep revenue growth ahead of audit effort, they are walking a tightrope, balancing between reducing compensation adjustments and managing headcount. Unfortunately for the firms, the private industry money is starting to get too good to pass up. I’ve known at least three people who more than doubled their annual take home by leaving the Big 4. One of them is me, so I’m pretty sure it’s not just a rumor. Using the “managing headcount” option, the firms are running out hours they can ask professionals to work, i.e. – there are only 24 hours in a day. So if revenues growth is declining, and expenses are increasing, what are the other options?  

    Anybody?

    Anybody?

     

    • Jackson

      1. Get rid of senior managers who won’t make partner (5 years as a SM is more than enough). SM’s also have lower billable hour quotas and clients are reluctant to pay the charge out rate. At the highest end of the pascals and lowest utilization, senior managers are really a drain on margins.

      2. Stop low balling each other. The big 4 is an oligopoly, no need to drop fees to unreasonably low levels.

      3. Treat your employees well enough to lower turnover; this will result in less of a need to pay significantly more for an experienced hire from industry of another big 4.

      • Guest

         The whole business model is based on hiring 22 year olds, working them until they burn out and quit (or get forced out), and then hiring a new batch to replace them.  Changing that would be extremely disruptive for these firms.

        • CPALady

          This is kind of an easy argument to make, but I don’t think it stands up that well.

          The model is based on A LOT of 22 year olds working like dogs and burning out (most even). But the B4 still need enough of those 22 year olds to stick around to becoming senior (and enough seniors becoming manager) that they aren’t incurring larger than necessary recruitment costs for experienced hires.

          It’s homeostasis. If there aren’t enough predators in the forest the deer population swells and they eat all the baby trees. If there are too many predators the population sinks and the forest ecosystem is overrun with trees using resources needed by the smaller plants providing cover for the field mice…

          You don’t want all the 22 year olds to love working here, but it can’t be hell on earth for all of them either… just for like 75%

    • JR

      Your expense breakdown doesn’t include cost full page ads (in lieu of bonuses) or paying golf players to wear your logo on the cap they sweat all over.

      • Guest

         Not to mention the cost of running a Twitter account for the sweaty hat.

    • GAAPforce1

      iono, charge more for public accounting services?  I realize firms are undercutting each other for engagement bids, but if what you are saying is true then that model is not sustainable.

      Partners want to keep their distributions or increase them, sure why not?  But they can look to the legal industry and see that didn’t work out so well either.

       Reduce staffing?  The work is there and doesn’t seem to be shrinking any time soon.

      For sure the firms would need to find ways to be more efficient, but it seems to be we need to pass on the costs and increase fees.

      But obviously, much of your analysis can be explained by the cyclical nature of the economy no?  I know you address that, but as the economy recovers liquidity should boost revenues (duh). 

    • Taxguy

      1) add premium value
      2) hire more senior managers – they add a disproportionate amount of value
      3) increase fees for the value added

      • Three_to_Five

        Let’s face it, an audit is like a prostate exam. It’s terrible for the patient and not much fun for the doctor, either. It’s necessary to prevent further problems, but most of the time its purpose is simply to confirm that everything is fine.  

        Why do I say this? Because just like a doctor can’t do much with his hand up your ass, an audit firm is never going to be able to “add value” to its audit clients. It would be unethical and an impairment to our independence.

        In that context, there are really only two ways to increase your revenues as a public accounting firm. One is to raise your fees to compensate for your increased workload and costs. This is difficult because of the economic pressures from our clients as well as the cutthroat pricing environment created by other firms. The second method is to increase your non-audit services, which is why you are seeing all the Big-4 firms building up their consulting practices. Really, the Big-4 are becoming huge consulting firms with audit practices, not huge audit firms with consulting practices.

        • Taxguy

          We add a lot of value. 

          • Three_to_Five

            My comments were limited to the audit practice. Tax adds a lot of value to tax clients, but your value is limited with audit clients because your advisory capacity is limited. I would label most tax practices as closer to advisory practices than audit practices. 

        • Three_to_Five

          And let me just say, I think that comparison should qualify me for the freelance finals. 

    • Robert Palmer

      Excellent second post.

      That said, maybe accounting firms could stop spending money on new logos? Seems silly for them to spend a collective $5 billion a year on this.

    • The Horniest Partner

      We tend to pee in the pool that we are all swimming in when it comes to charging fees.  I had a nice summer audit and my fees were very reasonable.  Along comes our biggest competitor (and a firm 3X our size) and this firm offers a fee 60% less than my fee.  Total BS.  I just don’t get it.  I can gripe all I want about them cutting corners and all that but at the end the day the ex-client is happy because they are saving 60% on a budget line item.  Now I got to find new business to replace that revenue.

    • Guest

      My 2 cents on answering my own questions, mostly because I was running out of my 1,000 words, and because I thought ending on a question was a good idea. The Big 4 comp structure is on a collision course. The firms have about tapped out their ability to fiddle with fees because clients have gotten smart, and they aren’t going to budge. They will continue to put firms in bidding wars because they know that there is a new round of mid-tier firms ready to take their place if the Big 4 doesn’t give them what they want. Grant and BDO are not nearly as “mid-tier” as they once were. They’ve also used up their optionality on reducing comp given recent attrition. I truly believe they are going to have to start messing with the partner compensation model. Whether that is the partner distribution, or the pension, the current model is not sustainable. I think GAAPForce1 made a great point referring to the Dewey Lebouf bankruptcy becuase our industries are not so far apart. Granted there will be some fall out because a lot of great senior managers are sticking around for the partner comp, but I think they have to start thinking about it at least.

      OK, I’m done.

      • keepin_it_real

        Difference between big law and big 4 is that in big law, partners can easily walk to another firm and bring their book of business with them. Tax and advisory can somewhat do this in big 4 barring independence concerns. Audit can’t. The lead partner on GE, JPM, Bank of America, or whatever isn’t going to quit and walk across the street to another big 4 and bring that client with them. In accounting, the client is attached to the firm. In law, the client is attached to the partner.

      • DOT.NOT.THE.FEATHER

        This BS about “now the comp structure has to change” has been happening since 1913, when the F*ing CPA designation was created. The collapse of Laventhal in the 80s/90s was instrumental in creating the LLP for the nearly all firms, and that was a far more reaching consequence than Enron or 2008. As long as there are minions ready to slave away and the CPA exam remains more exclusive than the BAR, then the status quo will continue. So far no one has presented any evidence of a monumental change to the pyramid structure of Public Accounting.

        • $19577774

          Agreed. When I was at my Big 4 firm, I can’t tell you how many of my staff would complain to me that things are worse than ever at the firm. Their whole two years of experience in the industry led them to this conclusion I guess. I guarantee you that thirty years ago there were staff at the firms bitching about how the business model was unsustainable and the firms were at the edge of the cliff. The sky is falling! The sky is falling!
           
          There are just a handful of certainties in life. Among them are death and taxes. Another certainty is that the Big accounting firms will live on, and the partners will continue to make bank and get blown by their mistresses at their summer homes. This is how it has always been…this is how it always shall be.

    • Itsjustme

      This is a great article……for Accounting Today.   Dude I spend all day looking at numbers, unless you are talking about salaries I could care less.  But hey that’s just me.  Maybe on saturday when I am relaxed and missing the thought of numbers i’ll revisit this article and read it.

      • Itsjustme

         I took the time to read it.  Nice article, interesting analysis.  Certainly a nice change of pace from the other crap posted on here.

      • Three_to_Five

        *Couldn’t care less. Every time somebody screws that up, a little piece of my soul dies. 

        • Itsjustme

          I typed that first then was like shit no thats not right and retyped it the way i had it.  It was a long day.  My apologies.

    • Kramer’ s Caddie

      Post B4V submission

      • Guessed

        if you want it that badly, post your email address, and he can send it to you.

        • Kramer’ s Caddie

           No. I, along with others, want to see it posted here and get compared to the other submissions.

    • Sugar tits

      Wasnt Arthur Anderson the biggest firm in the world when it went down?

      • Guest

        No, they were the smallest Big 5 firm. Of course unlike the other fims, they never merged with another firm to get bigger.

      • Leonard S.

        Andersen was not the biggest…..they were simply the BEST!!!  And 10 years later, all of the Big 4 reference Andersen behind closed doors in their internal startegy meetings.

        • Lenny stop taking bath salts

          Please get over what Andersen was and how great you all thought it used to be and how smart and ahead of the curve and innovative and client facing and profitable and who gives a rats ass because it’s gone, poof, no longer here, nobody else cares.  You were lucky that people hired you after the firm was falling apart and maybe you had a decent career at your new firm but just like a second spouse doesn’t want to be compared or hear about how great your ex- was, none of your current colleagues, friends, clients unless they also were a member of that super duper special secret society have any interest in hearing about it.  Move on.

          • Leonard S.

            I guess all you got was an offer from KPMG.  It shows!

          • Jcom

            LOL! so true.  They were once an elitist douchebag of a firm now they are no more

            • MrAudit

              That’s PwC’s job now

        • End of B4??

           Yes, in the sense that they don’t want to be total fuck ups like AA.

          • Big4Mgr

            I am not former Andersen, but I’ll say a lot of my firm’s stars and (probably a lot of yours) came from AA. I’m sure they had their share of goofs but their blowup was a big boost to the other 4 in terms of clients and talent.

            • End of B4??

              There is no argument that it was a boon for clients. 

              I can only speak for my experience in the Detroit market, but AA vets were non-existent in the audit side.  I knew some AA vets on Tax but they were dead weight.  It’s all relevant I guess. 

        • The Horniest Partner

          I took over audits from Andersen – they were garbage.

        • Andrew Y

           “Simply the Best”.  I love the kool aid you guys drink.   I would like to know how you have this knowledge of what “all of the Big 4” are talking about behind closed doors.  Because I can tell you that we do talk about them, but not in glowing terms.

      • Keepin_it_real

        Andersen Worldwide was the biggest global firm since it had Arthur Andersen and Andersen Consulting. AC split off from AW a year or 2 before AA went under. When AC left AW, AW went from being the biggest firm by a longshot to being the smallest.

    • Much better second post — thought-provoking, funny and a little snarky, but not so snarky that you had to backtrack on every single point in the comment section.

    • Guest

      The firms are pushing back partner promotion timelines to bolster partner payouts. There is no magic bullet in a promotion… Senior managers with 12-15 years experience can easily provide just as much value to the firm (read sales) as a newly minted partner. The longer the firm can keep the SM’s in the waiting pool before the quit, the more value they can extract from them without a commensurate increase in comp.

      • Guesty LaReux

        You nailed it Greta Von Guestenburg.  Partner candidate go through the “deferral” process for multiple years… “oh, you were sooooo close”  “just one more year”  “we just need to enroll you in a leadership development program and get you an executive coach”  “as soon as this other partner retires you’re in”  “I just want to get another 1700 billable hours out of you and tease you for another year with false hopes and promises and see if you’re naive enough to believe us and keep working here for min raises/bonuses”  [uh oh, did i just make that last comment out loud- if so, please disregard, just kidding, lol, oh crap, please don’t leave…]

    • Cheezwhiz44

      In my mind, the real issue is that the services provided by the big 4 – in particular the audit service, are simply not as valuable as we, the auditors and our friends, believe.  Think about it this way, all concerns that are listed on the NYSE are required by law to have an audit.  As a consequence, the audit does nothing to differentiate one firm from another.  Hence, no value is added by having an audit performed.  

      A service like an audit is valuable in an emerging market, or  for a Company that is growing and needs credibility.  In those instances, a reasonable argument can be made that having a more reputable auditor provide an opinion may result in more value being added to the auditee in the form of additional investment, reputation strength, etc.  In the US market, those opportunities are limited.  Rather, what we have here are Companies which derive no value from the services of their audit, and as a consequence are merely seeking a sort of commodity at the lowest price possible. 

      Though I’ve been involved in this business for many years, one of the first acts that I would make as an executive on the industry side would be to aggressively challenge fees, and continue to challenge fees, until every penny has been saved.  My rationale is this: the audit adds no value to my company.  They don’t help me sell a product, they rarely address a real risk (fraud, etc.) and the only true purpose they serve is to satisfy a regulatory requirement and to further the economic interest of those performing and regulating the performance of audits.  Another important factor to consider, and one often overlooked, is the fact that the days of the gravy train white-collar jobs are over in the US.  The costs simply must go down to remain competitive globally. That goes both in industry and in public accounting.  Think about it, any one of us involved in audit for a while realizes that there are too many people, at too many places, making over $150k a year while providing little tangible benefit to their Companies.  I’ve worked on clients where there was a veritable sea of dead weight, sitting there, earning a salary and accruing pension benefits as each moment passed.  The thing is, those bills come due one day.  The world is too competitive now for those jobs, and that goes for public accounting too.  
      The firms need to get lean (less “risk management/professional practice partners” adding layers of expenses) and mean (let go of under-performers sooner and with less separation expense, lower raises, etc.) if they want to survive.  It is only a matter of time until a true low cost alternative arises that changes the current environment, and it certainly won’t come from GT or RSM.  If no changes are made in anticipation of those competitors, there will certainly be a rude awakening.

      • Guest

         This comment was probably of higher quality than Loblaw’s actual post.  And that’s not even an insult to Bob as his post wasn’t half bad.

      • Broseidon

        Finally, one of the ostriches pulls its head out of the sand.   Glamorize it how you wish, the fact of the matter is that an audit is an interest expense, a cost of doing business.  Nothing more.  Get in, get your experience, and go do something worthwhile with your life.

      • MarshmellowFluff44

        Strange because I really enjoyed your article yet there was nothing remotely funny about it…. huh… weird… oh well?

      • Guest

        If you think shareholders of public filers don’t care about the audit report, then you are crazy.  If you work in private industry that has no debt obligation or regulatory requirements to disclose information to the public, then complain all you want about your fees.  But if you have to deal with the PCAOB, SEC, SOX and Dodd-Frank, then accredited investors DO care about the audit.  Get a little more real. 

        • Guest

          Actually you are wrong. 

      • Guest

        This is an excellent point and I think it responds well to a previous comment about the cyclical economy eventually resulting in a pick up in fees. The fact that audits are a regulatory requirement means that the firms are hamstringed on how to outdo each other. At the end of the day, buying an audit is like buying an oil change. You really just want the cheapest one. So regardless of how the economy does, there will still be intense fee pressure and firms will continue to try to win audits with lower and lower fees.

        Gald you didn’t join the competition Cheezwhiz.

        • Robert Palmer

          I disagree, I work in finance / oil & gas, and getting audited adds significant value to what we do. In short, it makes us get our shit together and flushes out anything that needs to be cleaned up. Additionally, our clients demand it, and we do reap value from the audit for presentational purposes (raising money, etc).

          Do we want the cheap audit? Yes, but we wouldn’t go searching outside of the top 100 to get the audit done. We do say screw the Big4 seeing as they all come in and propose engagements at 40% above the lower tiers.

          • Guest

            You should consider hiring a non-Big4 like KPMG, I hear they typically undercut more prestigious firms such as McGladrey.

          • Cheezwiz44

            Is your company publicly traded? If not, I tend to agree that in many instances there is value added during the audit process. The main thrust of my argument was that for listed companies the incremental value of an audit had been eliminated by imposition. Good comment though and best of luck to you.

            • Robert Palmer

              Good point. No, my company and our investment vehicles are not publicly traded. I now see better what you are saying, so I will concur with your thoughts.

              That said, after alot of the stories I’ve heard from B4 auditors I can see how there is very little value add in relation to the total cost from what is going on.

            • Guest

              If you think shareholders of public filers don’t care about the audit report, then you are crazy.  If you work in private industry that has no debt obligation or regulatory requirements to disclose information to the public, then complain all you want about your fees.  But if you have to deal with the PCAOB, SEC, SOX and Dodd-Frank, then accredited investors DO care about the audit.  Get a little more real. 

            • Robert Palmer

              We are arguing incremental value add to the company, not to the shareholders. The shareholders are already getting the audit report … We are arguing that for big public companies, there is no difference in value between the big 4 firms, so you might as well go with the firm low-balling. 

            • Guest

              Not necessarily the best idea.  You go with a firm that is low balling, you will get staff on the engagement that blow balls.  Then something gets overlooked and one year later you find yourself with a material misstatement that causes your prior year to be restated and you get a SD.  That’s what low balled fees get you.

    • $19577774

      Loblaw, I have to first say this article was much better than your first submission, which I realize isn’t saying much. But still, that’s gotta be worth something, right? I’m happy you decided to ditch the phony bullshit like how you leave recruits at the bar. Nobody bought that silly talk. This post was honest.

      A few comments…

      1. You had a lot of good things to say in this article, but it was much too long. A great literary work should be like a woman’s skirt…long enough to cover the subject, but short enough to be interesting.

      2. It is clear from reading your posts that you attended b-school in the United States, which is to say you are barely literate. Knowing this deficiency, you should put extra time and effort into proofreading your work. Read it out loud and listen to whether it sounds good. Have your mom proofread it. Plagarize some of it from the internet. Do something to make it read better. The writing just doesn’t flow well, but that can be fixed.

      3. Be funny. I know it may not come naturally to you, so maybe go buy a joke book. Steal some material from The Daily Show or Jay Leno. When you are writing a manifesto like the one above, it helps if there’s some humor in there. I do applaud you for avoiding the type of “humor” you used in your previous post though.

      All in all, good effort Bob. I think you are the frontrunner, which is to say my recommendation to GC is to hire no one.

      • O’Doyle and Loblaw Rules

        Hey Big4Tool

        Steal material from Jay Leno – what is this, 1994?  How about steal some material from Ed Sullivan and Merv Griffin, c’mon man!  

        By the way, with regard to proofreading, a comma should precede the use of “though” in the last sentence of comment #3. 

        • $19577774

          Good sir, I urge you to refrain from personal insults on this site as we are all professionals. I have not entered the freelance writer competition, but nevertheless I thank you for your kind punctuation advice. I will endeavor to incorporate your feedback into my future writings. Cheerio!

          • Loblaw & O’Doyle Rules

            I owe you an apology Big4Veteran.  That was a bush league comment by me.  As far as I know you are not a tool (unless you still work in the Big4 in which case the odds are extremely likely given your veteran status that you are a tool which is more of a product of nurture than nature for which you can’t be blamed).   Get a job in industry and you will be far happier.  Hugs and Kisses

            • GAAPforce1

              You must be new here because you don’t know B4V’s life story which he tells over and over.  B4V already is in industry and is very happy:

              *ahem* B4V did his time in the big 4.  B4V now makes rich MOFOs even richer and B4V makes bank doing it.  B4V never misses a house payment.  He has a hot wife, and she only gives him two BJs a month (no more no less).

              Now you know why B4V happy and is better the person then all of us.

            • Guessed

              GAAPforce1 got it exactly right.

            • $19577774

              Good, now that we’ve cleared that up…

              1. I respectfully disagree with your punctuation suggestion regarding the use of a comma in point #3. The comma is not necessary.

              2. I happen to think Jay Leno is fucking hilarious. I can’t get enough of that Jaywalking thing he does. It’s comedic genius.

              Good day sir.

      • End of B4??

         So where were you educated good sir?

      • TeamB4V

        I haven’t had time to read all the comments from the last couple of weeks…can you clarify for me — did you submit an entry for the freelancer position?  I love your work and would love to have read it. 

        • $19577774

          Thank you for your kind words. I’ll just assume they are genuine.

          I did not throw my hat into the ring for the freelancer job, but after reading a couple of the shitty articles in the first round I put together my own article just for fun (to put my money where my mouth is). I sent it to Colin and Adrienne and told them they were free to post it if they like. It is totally up to them as to whether it ever sees the light of day.

          • Kramer’ s Caddie

             You would think they could find time between monitoring comments and posting about how we should comment to post your submission.

            Then again – this freelancer competition is pretty strict, so tey need to maintain the integrity of it…………….

          • TeamB4V

            B4V, it definitely was genuine – I don’t have the wit to muster the sarcasm you guys throw around here.  What about it Caleb and Adrienne?  Pretty please, with sugar on top?

    • Guest

      The article’s title does not closely match the body of the article’s argument.  Where is the support to show that Net Income is down?  I see a revenue chart from 2010 that shows revenue has began to increase from the 2008 high, cool.  I do not see 2011 or 2012 revenues, which have began to dramatically increase due to consulting ventures (audit and tax have increased modestly, if at all).  I do not see any analysis of expenses and what you claim to prove have increased exponentially more than revenue.  

      Further, you present a graph showing fees per revenue from accelerated filers.  I see where you were trying to go with that.  The problems?  First, its outdated, irrelevant and does not align with your revenue chart from the beginning of the article.  Secondly, and by far most importantly, I did not realize accounting firms priced engagements differently everytime there was a change in revenue.  The price of an engagement will have little impact on the fact that ABC Company’s revenue went up 3% YoY.  The price of the engagement will be contingent on a slew of factors (i.e. regulation, increased areas of control reliance, new control or business environment, change in leadership, change in industry specific aspects, etc etc etc). 

      Overall, I had high hopes of this article by judging the book from its cover, only to find out the book should not have been published. 

    • Lolbisco

      Give Loblaw the job already.

    • Guesty McGuesterson

      Really interesting post Loblaw

    • $19577774

      One more correction for the article. Loblaw said SOX reflected the fact that both of the bill’s sponsors were career politicians and neither knew a lick about accounting. In fact, I believe Michael Oxley was a CPA prior to his decision to become more respectable by joining congress. If anything, Oxley took one for the team by pushing through a shitty piece of legislation that amounted to a giant handout to the big accounting firms. How many companies have customers that are required to purchase their services as a matter of federal law?

      SOX may be a shitty law which turned busy season into a year-round affair, but it was a huge boon for the accounting firms. It came at a time when companies were no longer able/willing to use their audit firm for consulting work. It resulted in billions of new revenues to the firms when the industry was reeling after the Enron debacle. I can understand why the staff hate SOX, and the partners may say they hate it too, but deep down I guarantee you the partners fucking love it.

      • SeniorSOXCONsultant

         “How many companies have customers that are required to purchase their services as a matter of federal law?”

        Hey Big4Douche, that’s not a new requirement due to SOX. The federal requirement of having annual audits was set in the 30s when SEC was created. SOX only added incremental requirement of controls attestation. 

        • $19577774

          Incremental work means more hours and fees, right?

      • Guest

        http://bioguide.congress.gov/scripts/biodisplay.pl?index=O000163

        Possible they might have omitted it from his bio.

        • Guest

          It would be nice if you addressed the comment above regarding how your article has nothing to do with its title. 

          • Guest

            I’m not sure how a title that says “revenues and expenses” doesn’t match an article about revenues and expenses, but in any case, JDA wrote the title so you’ll have to ask her. I would say that its slightly misleading in that the aim of the article was a discussion of comp structure, but I don’t feel like its as aggregious as appear to think it is.

            • Guest

              I could be drunk right now, but the title I read says “Revenues Down, Expense Up”.  If that is the case, I fail to see how the article articulates the heading of that title.  Again, it could be due to my inebriation.

    • Lbrister

      Having just been dropped as a client of Deloitte, I have had conversations with the mid tier firms to see if they are interested in auditing my company.  After describing management and their issues, I ask if they really want to work with my company.  The answer is a quick yes.  I then ask if the market is really that bad and the answer is an even quicker YES!  I’ve received bids over the phone at less than 1/2 of what Deloitte was charging.  

      • Guest

        What does that have to do with this article?  But I guess, the article itself does not properly align with its title, so it makes sense you posted this comment.

    • CrankyAccountant

      I like Bob (#teambob) but he’s got to get to the punch line faster in the future (maybe this one is just really long because of this specific topic).  I want to read a blog article after scrolling no more than two times.  Otherwise, I like the writing style, I like the content, yada yada yada.

    • Oy__Vey

      Long time lurker (I mean really long time… like, years…), but I felt compelled to post.  I liked it Bob L.  Much better than the first post, though your first was probably also the best of the bunch.  They were the only two posts to give me even a hint of a chuckle.  Just give it to Bob already and let’s be done.

    • Sum_guy

      Good post,

      funny thing is you could have written it 16 years ago when I graduated.

      Audit was a commodity then, the big 6 were trying to get out of audit and move into more value added work like consulting and outsourcing.  Then that blew up in their faces and they needed to become independent of their clients again.

      Frankly if it wasn’t for Sarbox and more recently IFRS it would be Big3 not Big4.

      /whenever someone says ‘accounting’ is a growth industry I remind them that consolidation of firms usually implies the opposite.

    • Guest1234

      Anyone else foot the expense line to make sure Bobby’s numbers were right?

      Anybody?

      Anybody?

      • Guest

        trust me, with this crowd, I checked it about 50 times. (please don’t be wrong, please don’t be wrong!!)

        • Robert Palmer

          The SEC has a “goodwill” expense item … That’s how they charge the time they are mastrabating at work.

    • Mid-Tier Tourist

      This is what I’d like to see more of on GC.  BLL seems to fill a “Matt Levine from Dealbreaker” shaped hole in the line-up. 
      http://tinyurl.com/74pf6pc

    • Ringthanes

      audit partners thinking they are worth 800k is the issue.  cant sustain that long term, and new partners are getting slowed down and bending over to keep the payments to the high unit dudes going for at least a little while longer. 

    • JackofAllTrades4

      Outsource, push seniors to do even more work, and create a 2nd class of low-paid associates/seniors that are more like EA’s than auditors (will eventually be outsourced or replaced by EAs).