The Carillion Carcass
The Big Four strike again. Or do they? The latest revelations regarding the run up to the collapse of Carillion are a familiar tale. Presumably this is a tale that was told in the run up to the fall of all the great corporate collapses of the past couple of decades.
You can bet your bottom dollar that ahead of Enron going down the number crunchers continued with the thumbs up routine, as they would have with Northern Rock and of course the latest oursourcer catastrophe(s).
But I think I have cracked this particular conundrum – Colombo style. Clearly, the art of auditing is backward looking, so if something is awry, e.g. even a few months before a Carillion goes down, this is not a reflection of the auditors.
The only problem if one extropolates this logic is that if the art auditing has no aspect of the present or the future, why employ these people? This is especially the case as despite all their obvious skills are good friends at KPMG, PWC et al, are not able to spot fraud, and are hence not liable for any negligence if any has taken place. In fact they are the very definition of Teflon.
Badge of Honour?
But there is more. If auditors have no ability to “smoke detect” issues, and can never do wrong, why exactly are they so deeply involved in the machinary of business and finance? Just about the best I can come up with is that they represent some kind of badge of honour whereby every self respecting entity aspires to have them. The analogy here would be having someone with a title on the board of directors.
Perhaps the irony of the latest twist in this sorry saga is that it is another bunch of overpaid, underworked and unaccountable (pun intended) / above the law individuals, are those who are attempting to stick the knife as far as our Big Four heroes are concerned. Yes, MPs have suggested in the most poetic way possible that the likes of EY and Deloitte have been “feasting on the carcass.” This is in contrast to MPs whose banqueting habits are normally limited to sources who are alive and kicking: taxpayers.
Big Enough To Fail
Of course, the sadness of all of this is that although it has been shareholders of Carillion who suffered on the hope of the company being “too big to fail”, it will in the end be the taxpayer who foots the bill as they did with the banking crisis.
What will be interesting as we see the likes of Barclays being prosecuted for alleged misdemeanors in saving itself from a taxpayer bailout, is whether auditors will ever suffer the same fate? While it may be tempting to think so, one would guess that such a scenario is still some years away. After all, it has taken a decade to nab the Barclays bunch. Indeed, it is conceivable that the art of auditing might change or be changed considerably in order that such a nightmare scenario might happen over the next few years to prevent the “profession” ever being in danger of having to swallow humble pie.