Nationalizing the Big 4

After PWC and Colonial Bank, let’s nationalize the Big 4 Audit Companies and bring in partner decimation as part of the punishment for failing to live up to professional standards.

Back in May of 2018 the Guardian ran a piece by Richard Brooks entitled “the financial scandal that no one is talking about”. It was an erudite analysis of how the professionalism of accountant has drifted into self-serving technocratism.

My piece is less erudite and with a stronger call for action.

It is increasingly foolish that we trust the audit of public companies to a too big to fail oligarchy who are paid for their services by the very company from whom they are meant to be independent and from whom they obtain vast other fees because they hold the audit monopoly.

The idea of being paid by the people from whom you were supposed to be independent made no sense in 1934 when the rule was set up. As the landscape slowly changed to narrow the list of the firms competing for the business to just 4 and the constant and regular failure of the firms to detect and prevent fraud and in some cases to aid and abet such fraud it has become increasingly foolish for we the people to trust the system.

I have thought this for a while, but recent events have reignited my ire and fueled my belief that this needs to become a conversation amongst the 'we the people'.

Earlier this month the Federal Deposit Insurance Corporation (FDIC) awarded $625m dollars against PricewaterhouseCoopers for negligence in the audit of Colonial Bank. It is the maximum possible award. The judge said that PWC did not design audits capable of detecting fraud and did not obtain sufficient competent evidence to support any of their opinions. In English this means they did not do the (expletive deleted) audit and just took the pay.

The damages are high but in addition, I would have like to see a modern Roman army decimation of the partnership to accompany it. The Romans executed their tenth. I would have been content with firing one in ten of all people over the grade of manager and removing their professional qualifications. As with the romans it would be randomly selected just to remind the remaining 90 percent that you cannot pretend it has nothing to do with you.