Edvenson Consulting

Subject:  The demise of the 'Big Four' audit firms, or, Is There Life after their Figurative 'Death'?

I refer again to Jim Peterson, who is writing for the International Herald Tribune while, I think, living in Paris.  In his article, "Saying the Unthinkable," for the November 10, 2007 international edition, he makes some thought-provoking suggestions as to what would result from the break-up of the Big Four's hold on audit reporting.  The answer is, I think, not the 'end of the world' the Big Four would have you believe.

First, he points out, internal audit departments would be reporting to their companies with "as much independence as they can muster."  Good luck.  I've been there and done that, and it ain't that easy. The external auditors' role, still there, would be more precisely sculpted.

I appreciate the way in which he calms the waves his earlier suggestions have caused in the world of internal auditors' cocktail lounge chatter.  External auditors would still be reviewing the internal auditors' work, firms would still find qualified auditors coming out of the collapsed firms (and outside of the collapsed firms, I add), niche review practices would develop that were, specifically, doing reviews on the nature of the business or company that told more about how their operations worked well, what was good, what was not, and how best the value, as well as the risks, of the company could be both measured and understood.  (That, in my words.)

One of the pleasures, he notes, would be stuffing the over-burdened litigation-happy model into the round file - that is, dumping it.  Auditors' reports would include strict liability limitations, satisfy shareholders' needs, and inform investors;  not exploit the firms through the activities of plaintiffs' and class action lawyers.

Niche practices.  Cross-performance auditing.  Cross-management auditing occurring next to accountant-auditing.  A new model that reduces liability-litigation potential?  It sounds like a perfect world, but, I would argue, it is also not unattainable!

Peterson refers, in concluding, to the title of an upcoming symposium by a "top global regulator":  "The Future of Auditing After the Big Four."  Well, happy new year, and let's bring on the day!

If you're interested in reading this article, it is presently located here:  http://www.iht.com/articles/2007/11/12/business/WEBmcolumn10.php