September 19, 2018

BDO 5-1

Handicapping Firm Failure

epic-failure.thumbnail.jpgGod bless the speculative and sensationalist British media. They’ve got no problem wondering aloud about whether accounting firms will be able to survive the backlog of lawsuits out there that amount to billions in damages sought by plaintiffs.
More, after the jump


PwC has already pointed out to everyone that they were not the auditors of King Ponzi’s empire but nobody cares because, the bloody money has to come from somewhere to compensate the victims. Plus, accounting firms have deep pockets and are likely to settle when in a tight spot, using insurance coverage. The problem now is that the suits are so big that insurance coverage may not be enough to keep the partners safe.
We’ve mentioned some of the more prominent lawsuits in our firm watch series of posts if you need to get caught up.
Natch, everyone laments about Andersen when the topic of firm failure comes up as it serves as a template of what can happen when a firm gets in serious trouble:

Andersen’s collapse highlighted the fragility of a global accountancy partnership. As soon as the extent of the fraud was made public, Andersen’s international divisions and partners not involved in the scandal detached themselves from the firm, making it impossible for Andersen to survive.

We’re not really sure what the odds of another Andersen sitch are but you can definitely count on firms continuing to get sued when there’s no one left after company failures and frauds. We’d invite our readers who are partners (or have partner-knowledge) to give us an idea what the feeling is in the current secret society re: the liability risk. Bonus points for former Andersenites’ stories.
We invite the rest of you to handicap the field for chances of failure in the comments. Ours, after giving it very little thought, appear in the tag line.
Billion-dollar lawsuit could destroy top accountancy firms [Telegraph]