I worked for one of the Big 4 and the biggest issue, aside from what this article is stating, is that public companies are increasingly complex; whether its the IT Environment, high-risk financial instruments brought on by clients, increasingly complex governmental standards (both financial and operational), and the markets' constant focus on growth forced the business (clients) and the audit firms to conduct additional (and often unbudgeted) substantive work. I couldn't tell you how many times I felt pressured to operate in the grey area because of audit budget constraints, regulatory deadlines, and client deadlines. As the business environment grows to be more and more complex and globally integrated, audit quality will constantly be at risk of declining across the board.
@@anikdas2792 I would always recommend new graduates to atleast attempt to interview and work for a Big 4 Firm... Especially if you're a glass is half full type of person. Yes, I worked A LOT. Yes, I was thrown under the bus A LOT. Yes, there's a lot of pressure to perform... But I learned a lot about business and how businesses operate, I met a lot of great business leaders and mentors, I met my best friends... and I learned a shitton.
And this is why the audit fees should increase rather than the trend of decline that we are seeing today. The more audit is treated as a commodity and decrease in fees, the decrease in audit quality will become more and more distinct.
Misconception: it is Auditors duty to find out frauds in the company. Reality: Auditors shall obtain reasonable assurance that financials are not misstated.
@Justin Woodall What the professor probably doesn't tell students is that you can whistleblow anonymously and get awarded based on the size of the fraud. You'd be a fool not to report a fraud comparable to that of Enron and possibly get millions of dollars for it
The auditor’s responsibility is to follow the letter of the law, and if you happen to read any of those letters you will realize there are alot of “grey” areas. I have been on both side of the fence and as an auditor most of the times it is about covering just enough ground to protect yourself legally and give your client a pass.
problem is in the conflict of interest. An auditor must not be a position to legally "protect their clients" and instead, it should be a truely independent audit, and the client shouldn't have any leverage over the auditor so that the auditing firm can come up with the facts as is, without having to think about losing a client or potential future losses. I think the whole model needs to be revised.
An auditor responsibility is to give reasonable assurance that the financial statements are free of material misstatements whether due to fraud or error.
@@mawavoy that's right, auditors don't check the bookkeeping of a company. That's what I mean, people don't even know what accountants even do much less what auditors do or what they're paid to do. People think they're the SEC's private army and that's not the case
accounting graduate here As long as audits are done by private business there is conflict of interest You gave us an audit opinion we don't like? well no more paycheck for you we'll find someone else! Thats auditing today bookkeeping IS accounting though, and also tax and audit
@Abraham C She quit and became a commercial real estate agent. We were lucky to be able to get out. She has a friend in the big four that is miserable....She said they only hire young people so they can suck the life out of them.
@@joehopkins3684 You shouldn't talk about your mom like that joe. Don't express your sad mommy issues on this platform. Its not a good look for you. Keep your head up. One day you'll grow up. Ill pray for you.
@@krys8494 Exactly, just another part of oligopoly, they pretend to be different but aren't. They are conservative socially, while most media are centrist or center left. Economically every single big media company is right wing or center right. If only billionares own media companies, the media will favour billionares.
I was a big 4 employee. Auditors don't have the time or the experience to uncover fraud. We just do what the PCAOB tell us to do. It's just a checkbox exercise. Advisory services aren't allowed at audit clients, I am not sure what advisory has to do with any of this.a
XplusX12345678 not really, auditors main role is to say whether the financial statements are true and fair. I am an auditor myself and we do not do fraud detection like we don’t go with the aim to see whether there is fraud happening. That’s the role of the board of directors, we do not have any liability if there is fraud going in the company which we are unaware of. If we detect fraud while we do the testings then we have to report it
@@Samibarihussain you're not really an auditor. Or you have been doing nothing but kindergarten Private audits. At least not one subjected to PCAOB regulations. PCAOB AS 2401: "Paragraph .02 of AS 1001, Responsibilities and Functions of the Independent Auditor, states, "The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. [footnote omitted]"1 This section establishes requirements and provides direction relevant to fulfilling that responsibility, as it relates to fraud, in an audit of financial statements" Examples of procedures designed to mitigate fraud risks. "The following are additional examples of audit procedures that might be performed in response to assessed fraud risks relating to fraudulent financial reporting: Revenue recognition. Because revenue recognition is dependent on the particular facts and circumstances, as well as accounting principles and practices that can vary by industry, the auditor ordinarily will develop auditing procedures based on the auditor's understanding of the entity and its environment, including the composition of revenues, specific attributes of the revenue transactions, and unique industry considerations. If there is an identified fraud risk that involves improper revenue recognition, the auditor also may want to consider: Performing substantive analytical procedures relating to revenue using disaggregated data, for example, comparing revenue reported by month and by product line or business segment during the current reporting period with comparable prior periods. Computer-assisted audit techniques may be useful in identifying unusual or unexpected revenue relationships or transactions. Confirming with customers certain relevant contract terms and the absence of side agreements, because the appropriate accounting often is influenced by such terms or agreements.21 For example, acceptance criteria, delivery and payment terms, the absence of future or continuing vendor obligations, the right to return the product, guaranteed resale amounts, and cancellation or refund provisions often are relevant in such circumstances. Inquiring of the entity's sales and marketing personnel or in-house legal counsel regarding sales or shipments near the end of the period and their knowledge of any unusual terms or conditions associated with these transactions. Being physically present at one or more locations at period end to observe goods being shipped or being readied for shipment (or returns awaiting processing) and performing other appropriate sales and inventory cutoff procedures. For those situations for which revenue transactions are electronically initiated, processed, and recorded, testing controls to determine whether they provide assurance that recorded revenue transactions occurred and are properly recorded. Inventory quantities. If there is an identified fraud risk that affects inventory quantities, examining the entity's inventory records may help identify locations or items that require specific attention during or after the physical inventory count. Such a review may lead to a decision to observe inventory counts at certain locations on an unannounced basis (see paragraph .53) or to conduct inventory counts at all locations on the same date. In addition, it may be appropriate for inventory counts to be conducted at or near the end of the reporting period to minimize the risk of inappropriate manipulation during the period between the count and the end of the reporting period."
An Auditor's job is to obtain *reasonable assurance* that financials are not misstated. Not finding out frauds. We work within the framework provided by law.
@@georgwilhelmfriedrichhegel9602 it is very much impossible to find complexly design frauds given the time constraints as per law and the remuneration provided . Auditor if only obliged to report fraud if he finds some evidence. After exercising reasonable due diligence if auditor is not able to find any evidence of material misstatements then auditor is not responsible.
@hussleman2334 It took the government over a decade to uncover the BOSS tax fraud. You expect these CPA firms to uncover complex fraud in 2 months? 🤣🤣🤣
It is an auditors job to find material misstatements whether due to fraud or error. Pretty much all of the major accounting scandals had fraud that was obviously material to the financial statements. So yes it is technically an auditors job to find fraud if it is material. The real problem is that auditing is a for profit industry in which most of its staff is young, underpaid, and overworked. Meanwhile, equity partners have a direct financial interest in the profits so quantity matters a lot more than quality.
Auditor job is to find material statement, inform that to client. And based on client's action, auditor makes an opinion. So if the auditor makes unqualified opinion, it means that the financial statement does not have material misstatement.
It's like saying it's not the GP's job to find out if a patient has cancer. The GP may not have the tools but has to refer to the specialists whose job is to find out if the patient has cancer
David Risley there are certain situations that arise that not even an auditor can account for especially in cases of deep collusion amongst multiple companies. If everyone you are gaining information from is lying to you, and are doing an amazing job of presenting fraudulent information, even the best auditor would not be able to find fraud.
As a Big 4 professional - an auditor reviews financial statements, docs, processes, and accounting entries. Then they give their opinion. These are the core responsibilities. Forensic experts look for evidence to be used in court.
Let’s break this down: the firms themselves are paying for these audits. The smaller the auditor, the more they will rely on a particular firm for theIr overall financial viability. Therefore, incentive to look the other way and retain clients - regardless of potential fraud - will be inversely proportional to the size of the auditor. Spin off the consulting portions? Perhaps. But breaking up the auditors themselves is an awful idea. In a world where auditors are paid by the company they’re auditing, competition is actually not a good thing.
The competition is a good thing if the other accounting firms scrutinize between each other. For instance : PWC get a clients from Chevron. They get money from auditing that company. Then, EY can look whether there is a fraud between PWC and Chevron. If EY found that PWC and Chevron made a fraud, EY can report this. PWC and Chevron get fined and the money from the fine sent to EY as reward.
@@chaowang3303 public investors already paying the share of audit fees, dude. It decreases companies' profit, then less retained earning, then less dividen.
You got it right Kevin. Most companies will just fire the Audit company if they cause too much trouble and replace them with a cheaper look the other way firm. The Big 4 are forced to overlook stuff or lose clients. It's just business.
As a former employee from on of the big four, all I could say is that the procedures are not always the best nor rigorous. I did not be part of the audit team but the obsession with the complacency of the clients is always a big issue. In my opinion there has to be more competition in this industry and stronger laws to avoid this problems.
As a former Big 4 employee, I think Big 4 firms are overrated in every aspect, including their benefits and work-quality. If you want that Big 4 title, go ahead. But the title comes with costs. Personally, I'd recommend mid-tier and local firms that actually listen to their employees and try to provide better working conditions.
10 years back my employer told me he is listening from start of HIS career that Big 4 are going to break. Big 4 are not going to break, everyone is in it
The Big 4 operates as a multinational network, not a multinational company. Each entity is legally separate from the others. They just license the name and promise to adhere to a certain code of conduct/ethics.
Not even that, they operate several different legal entities in a single geography or country. This allows them to continue their work even one of the entity has been compromised or is under scrutiny.
@@anshuranjan32 Yeah, they even compete against each other for clients. I worked for KPMG in my hometown and we had a client two states away, KPMG had an office in the client's city and I asked "why they don't provide staff for the audit or do the audit themselves instead of us going with only 2 people with a low budget for travel?" Partner told me that bc then the other firm would get to bill the client or at the very least he would have to share the fees with the partner in the other city lol
audits are not designed to detect fraud, they only provide a "reasonable assurance" that the financial statements are presented without any "material misstatements". The whole process is wacky since you are essentially paying for scrutiny from someone who you may not want to scrutinize you, creating a conflict of interest.
@@yashpandya6178 I can tell you have never worked on audit. It is not our duty to detect fraud, that's a separate service that the company has to pay for (yes, the very company who you are auditing, is the one hiring and paying you) Clients don't hire you so you can spot frauds on them, they hire you so banks can rely on that information to calculate loans, shareholders can rely on the numbers to value the company & bankers can rely on the numbers for M&A & IPO's Aslo, the amount of resources needed to go deep into the numbers & detect fraud is too much, the accounting firm wouldn't be able to work with multiple clients and make money as they would be stuck 3-6 months with a client instead of 2-3 weeks in a normal audit, and audit firms are in business to make money, not to serve as "police"
Oh! That's the problem, you're still too new to the industry, don't worry after 3-5 years of experience you'll understand it from a business point of view and not just as a student/entry level employee
@@yashpandya6178 Have you carried on any listed company Audit or be a Part of it? Do you know how a proper audit is designed? Do you even know SA's exist in the field of Auditing? Do you even know sophisticated Fraud is very very Hard to detect? So Basically according to your Point of view we need to sit with client for all 365 days and verify their Accounts? Are you kidding ? That's not Audit my dear that is Book Keeping that is done by Accountant or a team that is under the management... We are here just to certify that based on our observation and the Samples which we take We give a reasonable assurance as to that the FS are free from material misstatements... Reliance consolidated Turnover is 6 lakhs 50 thousand crores what do you expect us do ? Open and watch every entry passed in their Accounting Software ? Do you know that these listed companies need to conduct Board meetings at the year end ? And what is the time available for an Auditor to verify the Books and certify the FS before that is given for approval in Board meeting... Speak with some sense it is not Auditors are left just intact we have seperate Laws to guide our Professional Ethics and coupled with companies Act we are liable for damages caused to Shareholders if we are negligent in performing our duties....
@@ALittleMessi Honestly it's held too well. It's so well held in the US that now teachers are filling the void that would have been filled with religion with communist ideologies like critical race theory.
I worked at Enron and at a Big 4 and can safely conclude the Auditor's conflict of interest is the primary reason fraud still occurs. An accounting firm must not be able to engage in consulting work and business's and government should be required to turn over audit firms every 5 years to promote competition. They will still have plenty of work, just not guaranteed work.
@@ALittleMessi You're focus is on the trees and not the forest. The reason fraud occurs is due to how accounting firms are structured to operate globally. They are not incentivized to demonstrate cutting edge detection to boards and shareholders because profitability is what the latter two care most about. Governance is important but not at the expense of the stock/revenues tanking and expenses skyrocketing. Accounting firms have to walk this tight rope to keep all three stakeholders (shareholders, board, management) happy and doing so (aided by legalese) without gaining a reputation for 'rocking the boat' that could undoubtedly impact the bottom line of their consulting practice, which could comprise 50% of total revenue. If accounting firms were obligated to focus strictly on accounting/auditing they would then be forced to demonstrate value to stakeholders to stay competitive. On the flip side, boards should be prevented from cozying up to their auditors so that they too can be held accountable for their performance by shareholders. At the end of the day, an efficient market demands transparent and accurate financial insight from companies. If regulatory rules aren't standing up a structure that leads to this outcome, fraud is incentived.
No. The primary reason why fraud still occurs is because the company being audited doesn't have proper controls, measures and deterences to prevent their employees committing fraud. It is NOT an auditors job to prevent fraud. It is the responsibility of company management and corporate governance. If you were an employee at a Big 4 firm (highly suspect because of your lack of knowledge) you have done a poor job in reducing the expectation gap between the public and auditors.
@@kingston163 So, basically if you read IAS (International Audit Standards) the main objective of audits is for the users to get financial and nonfinancial information that substantially resembles reality. I mean, accounting is really a fiction and a set of rules set by people to standardize information that can be interpreted in very different ways (that is: amounts, notions, ...etc). Now, there's no way possible that a three month audit is going to review every single process or transaction there is, so there's these statistical models and auditing tests that reveal MATERIAL errors (due to fraud or bad maths). Also, there's always a significance level for these tests and omissions do happen. Nevertheless, the design of the internal control procedures that allow for Enron type frauds are management's responsibility and an EXTERNAL auditor can never participate on their design. They can test internal control but due to restraints on scope can't go deep enough to FORM AN OPINION (in the accounting sense of the term). For Forensic accounting look no further than what KPMG did with Wirecard. Stakeholders got reasonably angry because of the shadyness of EY's auditing and demanded answers. Wirecard hired KPMG to make a forensic review of an specific issue: Wirecard's subsidiaries and affiliates in Asia that were billing the parent for some shady services. You see? You've got an specific issue and scope and your objective is to find either fraud or error. You know where to look at. I went all in because it's Saturday morning and have barely anything to do, hoped it helped.
@@kingston163 there's multicountry audits. Here in Mexico big 4 do the Mexican and, most of the times, also the regional part of transnational companies' audits. Year long audits do exist but are extremely expensive, generally only for big financial institutions. I mean, there's a limited amount of qualified CPAs in the world. There's not just money constraints but also educational system constraints and that can't be put on auditing firms. In general terms the cost of regulation can never be greater than its benefit. We've got a big challenge upon us as a society to find solutions for these dilemmas.
As a student of accounting who has been trying very hard to get into audit I can tell you that there are multiple issues. First, auditors are often overworked, so when a potential flag for fraud is discovered they will often overlook it if it can be explained away. Second issue is that independence is never fully realized. Clients pay their auditors to audit their books. The firms are literally being paid to examine their books, if they actually find fraudulent financial reporting God help us all. The client will probably go under and then the firms loses a client and it's fees. Lastly, auditors are just being paid to audit and verify that financials are accurate. Auditors do not guarantee that a company isn't failing or isn't insolvent.
You're right. But on your last point - the basis of the financial statements is typically going concern. If the business is not a going concern, but files statements as though it is, they are materially misstated. So the auditor must verify whether they are a going concern.
Continuity in audit teams is what is required here, ridiculous high employee turnover within means the seniors, managers and staff never have the deeper level of understanding of an entity's controls to be able to audit it to a very high level of quality. The business model in these big 4 also have to be criticality reviewed because it is all about taking in a high volume of grads and school levers, work them incredibly hard for 2-3 years and the expectation is that the majority of them should leave the firm upon qualifying so that they can take in the next set of fresh blood. In this increasingly complex financial world, that model is simply not fit for purpose any longer. The firms themselves know that this is at the core of falling quality. Lack of continuity in audit teams
Auditing is meant to be flawed. A higher scrutiny would mean a way longer auditing which will provide useless and late information and require the company to pay more for its auditing.
@KR I mean they literally teach you this day 1 of audit class. Very first chapter in the book. Only issue is normal people know nothing about it and just scream when a scandal happens
I still remember those insane timelines with little staff, we had to work 18 hours a day they would book hotels right next to the client office with no windows, seniors even mentioned that we should pretend that we did audit work. Usually we need 25 samples, we would sample say 4-5 if those were ok we will pretend that we did the rest. There was no way PCAOB or our review partners could detect it unless they redid the samples themselves.
Auditors cannot be independent when they rely on fees from the client, and the client needs to be happy, therefore a clean audit opinion may be issued when inappropriate.
Audit should be conducted by government agencies. But who would pay for it. That is the tricky part. Tax payers would suffer. I think establishment of big 4 itself was a shortcut solution which caused an issue till now.
@@editg121 Nah, governments would be worse. Fewer heads would roll and fraud would be less likely to be discovered. Take a look at how long it takes to build a highway.
When bank audits could be alloted independently then why not the audits under various statues.audit requires complete independence so that appropriate opinion is issued.all audits should be allotted by the authorities under specific statues wherein a portal could be developed and the client should be required to deposit the audit fees before hand.
@crazy horse dance - Yes he should leave only once he's gained some experience at least on paper. Having a Big 4 on your resume helps in the future. It's upto him as to how to take his career further by learning in small to mid size companies.
In the US, the big 4 are regulated by the PCAOB, a subsidiary of the SEC, and they select audits every year for inspection. It’s highly regulated as it currently is, can’t imagine a breakup of the firms or a spin off of the audit practice.
SA 200 Audtor can give only reasonable assurance that financial statements as a whole are free from material misstatements due to the inherent limitation of Auditing.
@@RichardCatalanoNY In many cases reasonable assurance isn't being given due to budget and manpower constraints imposed by the big 4 in order to keep their audits profitable. The incentive structure is also running the wrong way where. Public companies want to pay as little as possible for an audit; and want auditors to do the minimum amount of digging to get an unqualified opinion.
Well I believe most regulators do not realize that, for instance, if you are auditing a bank its quality depends on the quality of the hundreds of thousands of loans granted. If you put on top of that derivatives you are adding massive complexity... I bet even the board of directors can't have a clear picture of the bank's financial position. You may have a lot of tools to rate the quality of the loans but are they useful? How many triple AAA COUNTRIES got bankrupt in 2008?
Well, the ppl who audit that companies don’t have deep knowledge about financial engineering, fancy financial instruments, and sometimes all information needed to give a trustful report. And the interest conflict between consulting and audit speaks louder when you catch something wrong. They neeed to be break up: audit or consulting, not both.
In the video they claimed to have millions of employees. What they fail to tell you is that they are actually understaffed and overworked. This dilemma is an issue of corporate greed, not incompetence.
This shouldn't surprise anyone, like the old saying "Don't bite the hand that feeds you". The very idea of a company pays to have itself audited or rated is as absurd as me paying someone to write a reference letter about myself, yet "free market capitalists" have you convinced otherwise. Here is a simple fix - a non-profit investor funded audit company to audit all publicly trade companies.
Very true. Most of the audits result in unqualified reports as long as prior years were all unqualified. Auditing is a bull shit job in my view. Auditors pull the same sample data and as long as it is not blatant material fraud, they’re fine with it. And like you said paying the auditing firms creates a conflict of interest. These firms want to retain your business for audit next year. They have their own portfolio of clients to retain for recurring revenue. It creates a cycle of bs.
It was "The Big Eight" when I started audit in 1986. Arthur Andersen, Coopers & Lybrand, Price Waterhouse, Arthur Young, Ernst & Whinney, Peat Marwick & McLintock, Deloitte Haskins & Sells, Touche Ross.
@@editg121 smart as in they're the only ones who know enough to check and do the corrections out of everyone. clearly u aren't smart enough to be one of us
If we keep aside any possibility of malicious intent; still Big 4 partners engage with zillion of audit clients simultaneously with their limited team. Greed is the reason! What does this mean?? An overburdened team/ resources with stricter deadlines are prone to miss critical information, reduced sample size and thus produce inaccurate reports, sometimes fatal.
The more regulated is the market of audit services from the outside, the more the problem of oligopoly in this market is getting worse. Because small firms simply cannot withstand such a high burden of government regulations, although they could easily provide services at the same high level as the big four.
I would never say they could easily do it, with or without regulation. The size and complexity of clients is insane, and a small company simply doesn't have the manpower to audit that. They could handle maybe 1 client a year if we are talking fortune 500
@@ALittleMessi It's standard practice even for big audit firms to work together with their competitors if they have a very big client and they need expertise in some geographical area in which they don't present currently yet. The same could be with small firms so it's not the problem of size.
As a CPA who worked for one of the Big 8 firms, I can cite multiple material financial misstatements that existed in our publicly traded clients. I also watched the partners panicking trying to explain away the errors - even to the point of creating new GAAP right before our eyes. I would rather have this handled by regulators with fines and jail time for execs. The big accounting firms are basically well-paid whores for publicly traded companies wanting to perpetrate frauds on the investment community - pay then enough, and they’ll sign off on anything.
I can only speak for PwC. We have detailed procedures to ensure our advisory work with audit clients does not create real or perceived conflicts of interest.
As auditors we do enough sampling to pass a company. Companies are not willing to pay more money for a more extensive audit. Time is money. The big 4 want to finish audits as quickly as possibly and move on to the next.
Let the insurance company step in!!! The company pays premium to the insurance company, then the insurance company hires the auditor. The more problems the auditor found, the higher premiums the insurance Co. Will charge the company. The auditor's life could be so much better. Role of "inspector plus service vendor" should not exist.
What would the company pay insurance for? There's no insurance company that will insure you for fraud, it's like insurance for a murder case. You've got an idea but forgot there's no product or market or desire from anyone for your proposed "insurance"
Well, the ppl who audit that companies don’t have deep knowledge about financial engineering, fancy financial instruments, and sometimes all information needed to give a trustful report. And the interest conflict between consulting and audit speaks louder when you catch something wrong. They neeed to be break up: audit or consulting, not both.
A general auditor's lack of knowledge about a unique asset class or specialized area of the business isn't an excuse. That's why they're allowed to bring in specialists (such as financial specialists) to help them with that part of the audit.
Biggest issue is the dependency risk... Companies pay for their audits directly, and hence why would an auditor "bite the hand that feed's it". What they need is increased directly regulator audit and allow the BIG4 to focus on consulting.
The workers at these places are given heavy workloads and quality of work suffers. It's a mistake to think that the brand name automatically results in superior quality.
Not to mention partners throw an intern, 2 first year staffs and a senior to perform the audits lol. Just ocassionally a manager or partner will show up to check the progress made & make sure work will be done by the deadline
Until you can get audits paid appropriately for the work, you will find the expectation gap continuing to exist. Audits are criminally underpaid, and so the staffing to meet these audits are unsurprisingly, understaffed. It's also why the Big4 need to get other forms of work (tax, financial advisory, consulting) to keep the audit business going. It just isn't sustainable.
Astonishingly I have seen no mention of KPMG in the Silicon Valley Bank fiasco. Its yield to maturity securities portfolio was nursing a $15 billion loss on a $91 billion asset pool. Equity? $16 billion. Yet the auditors were completely silent on the matter of going concern. I don't think that's corruption. It is simple incompetence.
Pretty good summary. I've always wondered about objectivity and independence in the context of private accounting firms. I.e. when you have an audit client that makes up a significant portion of a partner's book there is always some level of incentive to lose objectivity to avoid pissing off the C level and risk losing the annuity. I don't know if there's a better answer but when someone's paying you to do the work, there are competitors that can take it from you, and it's a big piece of your book I don't think you can truly be 100% objective and independent as an auditor.
As a solution exchange should name and pay for auditing listed companies, charging the expenses to companies and thus avoiding conflict of interest that persisting today
@@bulalirozani4392 Do you know how unrealistically impossible it is to go over every single piece of information of a multibillion dollar company? Especially when people are actively trying to deceive you? As an auditor, we do our best to provide REASONABLE assurance that the financial statements are fairly and accurately reported. We don't ever guarantee it.
@@bulalirozani4392 it is usually employees and executives colluding when commiting fraud. Most fraud is found by whistle blowers, mainly colleagues informing professionals of misconduct.
Can’t be surprised, after seeing how they treat there employees... worked their for 1 year, avg salary per hour was 3-4$/h... they make you sign a contrat for a salary per week and make you work 60h-70h/week. They don’t have to give you minimum wage or pay you overtime because you are a contractor and not an employee.
I got an (final) interview in one big 4 next week. I’m currently employed in a national company from my country and they pay more than the big 4. BUT working in a big4 Will open so many doors from multinational companies (in the future after a few years of hard work ). So after all It is worth it? If someone who worked there could answer i would be very grateful thx
The thing about Enron, a fascinating case I studied years ago, is that the company was playing a shell game that should have been obvious to any smart auditors looking at the business model.
Big 4 aren't auditors...they are consulting firms! Their biggest revenue stream is CONSULTING. Big 4 will always remain Big 4 but they will evolve. Separating the audit and consulting service lines is a great thing but what real difference is it going to make - we can't audit and consult the same company right now anyway
The problem in audit is not that audit firms have other activities, as there is little interaction between audit services and other services. The problem is that the client you audit is the one paying you. If they "bother" the firm, the manager will change auditor next time and won't comeback...
As a retired CPA, people might not understand accountants vs tax preparers, clerks and certified audits. Most accounting work, by far, is done in house by clerks and company accountants. Tax prep is by them, or by an accounting/tax firm. Above all this is the certified audit, for public consumption (i.e. quarterly reports, etc.) When a company certifies something, they put their fate on the line. It's hard, in a digital world-wide universe, to certify anything. Thus, only the strong, and lucky survive. The history of this field is fascinating and a subject you, no doubt, have never looked into. Some famous business events took down their accountants, too.
thomas aquinas the loss of the bedrock of accounting validity - the paper trail - disappeared years ago. It’s all built on a foundation of sand, silicon actually.
1 will collapse. Probably EY. Because other 3 are in emerging markets. EY has been cooking up alot for banks and banks will continue to hide more and more assets of banks which makes them risky for investing in one
Lots of experienced Auditors join their clients after 5 years in the audit industry. There’s always a familiarity threat if the audit methodology remains the same. And also with the experienced Auditors becoming the clients after joining the corporate having a higher position, there will be intimation threats.. although there’s safeguards for such threats, nobody can prevent fraud from happening just by having annual or internal audits..
Worked for EY, in Virginia USA for 2 and half years. Wasted time. Never happened to me not to learn anything new at the workplace like at this place. I also couldn’t believe how NOT intelligent people at EY from Staff to Partner they are. Never seen something like that in my career. EY is now auditing government clients by WASTING TAX PAYERS MONEY!!! We already know that government is huge money waster, but now with audit companies auditing government we tax payers are being robbed twice. DISGUSTING!!!
I agree that audit and consulting should be separated in order to be prevent any clashes in conflicts of interest! It’s definitely not worth risking the loss of consulting revenue just because of some scandals from the auditing side...
Most auditors don't even bother to understand their clients' businesses but focus on the "ticking-& bopping" of outdated checklists after checklists routines. The audit partners are loaded with huge fee budgets that they'd "swallow" garbage explanations "lock stock & barrels" from clients for fear of losing their business. The clients know these damn well.
The allowance of tertiary/ additional offerings lends itself to a clear path of conflict of interest. How can you offer "Management Consulting" while clearly and supposedly offering "Auditing" services to the same company?
Can't say I know much about all the internal workings of audits, but from my limited accounting background I understood it as a silent handshake of I'll look at your books and most likely give some recommendations, see you next year. Easy to see if there's millions of dollars on the table that minor issues just get thrown into a clean opinion. (Can understand the flip side though cause you can only comb through so many books until you lose your mind.) Really interested to see how this ends up.
You are spot on with your assement. That is generally how it works. Another factor is if the audit company will play ball. If they don't they just get replaced with someone who will. Seen it happen many times!
@@luisfer9361 Big Four produces greater revenues than MBB because they do more stuff, but if you're a consultant you'd never take a big 4 job over MBB. MBB are the holy grail of consulting jobs and you 100% get paid more at every title at an MBB versus big 4. To the idiot saying big 4 consultants get paid just as well, you're an idiot. Starting comp at MBB for consultant is 165k not including bonus and big 4 doesn't come anywhere near that.
@@FXFXFXFX you've actually worked there? Where did you get those numbers from, bro? If you're talking about management consulting I must agree with you, pay is better. Nonetheless I meant they get paid just as much per engagement. But come on, on the rest of the consulting scope Big 4 does pay really well for roles north of manager. Now, for the $165k figure there's no way in this world that's an entry level position in any geography 😂. Starting roles begin at around 70k-80k. Being honest you just sound like an MBB fanboy from a nontarget school, but hey, I really can't be sure...
This is all I heard accounting students talk about and really didn't care because the RN program was more for me but I struck with accounting with an outstanding GPA and have the chance to work for the big 4s and still don't want to. stressing yourself trying to to get in won't gay you in but focusing on doing great is less stress and will. I want to work for a small company that pays well. I'm not being greedy for money but to love what I'm doing 😎
They don't. They should all get out of business with their armies of trash accountants that can't even do basic journal entries and bill naive clients like crazy.
Audit expectation gap: the difference between the public's perception of the auditors roles and responsibilities and what the auditors roles and responsibilities really are
So basically going by people comments we need to sit with client for 365 days and monitor their transactions and give Assurance on FS... People confuse Book Keeping with Auditing...🙃🙃🙃
I used to see forex as a side income but it has proven to be a major source of my income ever since I came across MR Jason, his experience of the forex market is unrivaled.
@Fajitahmed Audit! Everyone I’ve talked to in advisory says it’s a lot easier (+ better compensation and no CPA required). Be careful about getting stuck, though. The exit opportunities aren’t as fruitful
most of the grunt work are carried out by graduates/ offshore team and interns. the senior managers and above, including partners, don't really give a shit, as they are raking in the big money - i.e. they are not the ones on the floor talking to the client every day scrutinising every detail. The first years, with the offshore team and interns, have no chance in providing adequate work quality. The training, as the big 4 continues to claim is world class, were absymal in reality due to the low pay and long hours, which push away the talented seniors who probably have the only chance of finding stuff like this as they have a few years examining the company under their belt. Companies see these as just a cost centre and a mark from the big4 should not be seen as gold standard.
If anything they will gain more clients. You are missing the biggest point of them all, Money and Power. Big 4s have power to undercut competition, even if it means that they have to pay for the auditing of the client. I have seen it first hand, I work for one.
The solution seems obvious to me. Companies should not be able to pick who audits them. You need an audit for some reason? You go to a central authority who starts up a preliminary audit into how much they think it should cost (which is correlated with how much work it will take), then goes and finds a firm of the appropriate level, so the company being audited can't complain that they're being overcharged because whoever they went with they'd get charged the same amount, and the auditing firm can't rack up costs because they're paid a flat fee determined by someone else. The major problems are making sure that the central authority does a good job pricing audit jobs and doing peer review on the firms that accept the work to make sure it's being done well. It seems like a much better model than what we have today, and it doesn't even have to be a governmental authority - there are CPA societies everywhere that are not part of the government but act as a professional association that could be the backstop of the central authority, so that it would be a "free market solution" as opposed to one being implemented by the government. All the banks and regulators have to say is "we want audited statements, but you can't choose your own auditor" and once such an authority exists, it's reasonable to make such a demand, and would cover their backs much better than how it works now. The reason that these large firms fail to detect fraud is in large part because the guidelines on auditing are extremely vague. For the most part, there are no hard and fast rules about what you need to confirm with outside parties; the auditors are just supposed to use their professional judgment in order to determine the most effective ways in which material misstatements might be uncovered. With the pressure to keep costs low, it's not surprising that their judgment can be clouded and deciding less thorough procedures are necessary than they might think otherwise if it weren't for the goal of keeping the bill down. And certainly I don't mean to say that there should be hard and fast rules, because every company is different and there are different risk factors at each one that demand different approaches from the auditors. Unfortunately, the large audit firms didn't get large by being good at uncovering misstatements - they got that way from being good at finding customers. I don't have any experience outside the very small firm that I work for (2 other CPAs), but I had a co-worker who started at a Big 4 firm, and he was just absolutely awful in terms of caring about the quality of his work and seemed to care way too much about keeping the billing in a region the client would easily accept than making sure things got done right. There absolutely needs to be a mechanism where auditors are not capable of being fired for billing too much, and that pretty much requires an outside authority to decide how much it should cost before the auditors are brought in, or else the opposite would be the problem.
I worked for one of the Big 4 and the biggest issue, aside from what this article is stating, is that public companies are increasingly complex; whether its the IT Environment, high-risk financial instruments brought on by clients, increasingly complex governmental standards (both financial and operational), and the markets' constant focus on growth forced the business (clients) and the audit firms to conduct additional (and often unbudgeted) substantive work. I couldn't tell you how many times I felt pressured to operate in the grey area because of audit budget constraints, regulatory deadlines, and client deadlines. As the business environment grows to be more and more complex and globally integrated, audit quality will constantly be at risk of declining across the board.
Complexity is the enemy of progress. It's complex on purpose to keep competitors out.
Would you recommend a new graduate to join any of the big 4 in this situation ??
Anik Das Yes. It’s good to have on your resume, gives you a premium when you bounce to industry or public accounting
@@anikdas2792 I would always recommend new graduates to atleast attempt to interview and work for a Big 4 Firm... Especially if you're a glass is half full type of person. Yes, I worked A LOT. Yes, I was thrown under the bus A LOT. Yes, there's a lot of pressure to perform... But I learned a lot about business and how businesses operate, I met a lot of great business leaders and mentors, I met my best friends... and I learned a shitton.
And this is why the audit fees should increase rather than the trend of decline that we are seeing today. The more audit is treated as a commodity and decrease in fees, the decrease in audit quality will become more and more distinct.
Misconception: it is Auditors duty to find out frauds in the company.
Reality: Auditors shall obtain reasonable assurance that financials are not misstated.
It's not to an extent.
Spoke like a true CPA
Materially misstated* for additional legal protection
💯
Money talks tho. 😂😂😂
First day of accounting lectures-
Lecturer: So you guys heard of Enron?
@Brad Sanchez haha! Ain't that cool!
@Brad Sanchez this makes sense. in order to find fraud, you must know how to commit it.
🍷 🕶
@Justin Woodall What the professor probably doesn't tell students is that you can whistleblow anonymously and get awarded based on the size of the fraud. You'd be a fool not to report a fraud comparable to that of Enron and possibly get millions of dollars for it
@Justin Woodall It's a huge price to pay, but I'd rather take the 1.1 million and use it to day trade or invest than enable corruption
The auditor’s responsibility is to follow the letter of the law, and if you happen to read any of those letters you will realize there are alot of “grey” areas. I have been on both side of the fence and as an auditor most of the times it is about covering just enough ground to protect yourself legally and give your client a pass.
Ironically true
problem is in the conflict of interest. An auditor must not be a position to legally "protect their clients" and instead, it should be a truely independent audit, and the client shouldn't have any leverage over the auditor so that the auditing firm can come up with the facts as is, without having to think about losing a client or potential future losses. I think the whole model needs to be revised.
An auditor responsibility is to give reasonable assurance that the financial statements are free of material misstatements whether due to fraud or error.
Andre Winston Powell the public wants absolute assurance, and has a tendency to blame the auditors whenever something goes wrong.
reasonable assurance
For all the CPAs in here:
Don't get mad, people commenting here are the same people that confuse accounting with bookkeeping
LuisFer , I laugh because a lot of fraud takes place in the bookkeeping that goes undetected in the auditing.
@@mawavoy that's right, auditors don't check the bookkeeping of a company. That's what I mean, people don't even know what accountants even do much less what auditors do or what they're paid to do. People think they're the SEC's private army and that's not the case
@Teringventje lmao u triggered m8?
accounting graduate here
As long as audits are done by private business there is conflict of interest
You gave us an audit opinion we don't like? well no more paycheck for you we'll find someone else!
Thats auditing today
bookkeeping IS accounting though, and also tax and audit
@@GG-sp1cq any high school graduate can bookkeep. Accounting is much more than that. I'm also an accounting graduate BTW.
Sorry the general public is clueless about what goes on in any of these big companys.
I can understand
Making things seem more complex than they actually are is the core of their trade.
And if they remain clueless then another Enron is inevitable
Most of the public dont really care
crashweaverda just as they wouldn’t know a supply and demand graph if it hit them in the head.
My wife was a auditor. She said it was soul crushing work.
@Abraham C She quit and became a commercial real estate agent. We were lucky to be able to get out. She has a friend in the big four that is miserable....She said they only hire young people so they can suck the life out of them.
@@PappaMustafa ah, an unattractive and dull woman. The type that willingly joins the field. Now a real estate agent. The same old same
@@joehopkins3684 You shouldn't talk about your mom like that joe. Don't express your sad mommy issues on this platform. Its not a good look for you. Keep your head up. One day you'll grow up. Ill pray for you.
King Khan joe mama
@@joehopkins3684 Don't tell us about ur Poor Mom no-one wants to hear it Poor Joe😶.
You guys ever going to talk about the Media olygopoly ?
Conflict of interest
Haha
UA-cam ended this problem.
R S fox news is pretty popular
@@krys8494 Exactly, just another part of oligopoly, they pretend to be different but aren't. They are conservative socially, while most media are centrist or center left. Economically every single big media company is right wing or center right. If only billionares own media companies, the media will favour billionares.
I was a big 4 employee. Auditors don't have the time or the experience to uncover fraud. We just do what the PCAOB tell us to do. It's just a checkbox exercise. Advisory services aren't allowed at audit clients, I am not sure what advisory has to do with any of this.a
It is not the auditors role to detect fraud, it is the board of directors of audited client
@@Samibarihussain auditors have fraud procedures, and they are supposed audit controls that are designed to catch errors included fraud.
XplusX12345678 not really, auditors main role is to say whether the financial statements are true and fair. I am an auditor myself and we do not do fraud detection like we don’t go with the aim to see whether there is fraud happening. That’s the role of the board of directors, we do not have any liability if there is fraud going in the company which we are unaware of. If we detect fraud while we do the testings then we have to report it
@@Samibarihussain you're not really an auditor. Or you have been doing nothing but kindergarten Private audits. At least not one subjected to PCAOB regulations. PCAOB AS 2401: "Paragraph .02 of AS 1001, Responsibilities and Functions of the Independent Auditor, states, "The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. [footnote omitted]"1 This section establishes requirements and provides direction relevant to fulfilling that responsibility, as it relates to fraud, in an audit of financial statements"
Examples of procedures designed to mitigate fraud risks. "The following are additional examples of audit procedures that might be performed in response to assessed fraud risks relating to fraudulent financial reporting:
Revenue recognition. Because revenue recognition is dependent on the particular facts and circumstances, as well as accounting principles and practices that can vary by industry, the auditor ordinarily will develop auditing procedures based on the auditor's understanding of the entity and its environment, including the composition of revenues, specific attributes of the revenue transactions, and unique industry considerations. If there is an identified fraud risk that involves improper revenue recognition, the auditor also may want to consider:
Performing substantive analytical procedures relating to revenue using disaggregated data, for example, comparing revenue reported by month and by product line or business segment during the current reporting period with comparable prior periods. Computer-assisted audit techniques may be useful in identifying unusual or unexpected revenue relationships or transactions.
Confirming with customers certain relevant contract terms and the absence of side agreements, because the appropriate accounting often is influenced by such terms or agreements.21 For example, acceptance criteria, delivery and payment terms, the absence of future or continuing vendor obligations, the right to return the product, guaranteed resale amounts, and cancellation or refund provisions often are relevant in such circumstances.
Inquiring of the entity's sales and marketing personnel or in-house legal counsel regarding sales or shipments near the end of the period and their knowledge of any unusual terms or conditions associated with these transactions.
Being physically present at one or more locations at period end to observe goods being shipped or being readied for shipment (or returns awaiting processing) and performing other appropriate sales and inventory cutoff procedures.
For those situations for which revenue transactions are electronically initiated, processed, and recorded, testing controls to determine whether they provide assurance that recorded revenue transactions occurred and are properly recorded.
Inventory quantities. If there is an identified fraud risk that affects inventory quantities, examining the entity's inventory records may help identify locations or items that require specific attention during or after the physical inventory count. Such a review may lead to a decision to observe inventory counts at certain locations on an unannounced basis (see paragraph .53) or to conduct inventory counts at all locations on the same date. In addition, it may be appropriate for inventory counts to be conducted at or near the end of the reporting period to minimize the risk of inappropriate manipulation during the period between the count and the end of the reporting period."
XplusX12345678 kk cool story bro Cba to read that
Auditing and forensic accounting are totally different.
An Auditor's job is to obtain *reasonable assurance* that financials are not misstated.
Not finding out frauds.
We work within the framework provided by law.
@@georgwilhelmfriedrichhegel9602 it is very much impossible to find complexly design frauds given the time constraints as per law and the remuneration provided . Auditor if only obliged to report fraud if he finds some evidence. After exercising reasonable due diligence if auditor is not able to find any evidence of material misstatements then auditor is not responsible.
@@georgwilhelmfriedrichhegel9602 no one can be 100% certain about any fraud. Its too much to cover
Under what law? The ones that other auditors created or had an input in? LOL. The goverments already assess tax, throw audit under it as well.
@hussleman2334 It took the government over a decade to uncover the BOSS tax fraud. You expect these CPA firms to uncover complex fraud in 2 months? 🤣🤣🤣
But it's not the Auditor's job to find fraud. That's for Forensic accounting, which is a completely different service.
It is an auditors job to find material misstatements whether due to fraud or error. Pretty much all of the major accounting scandals had fraud that was obviously material to the financial statements. So yes it is technically an auditors job to find fraud if it is material. The real problem is that auditing is a for profit industry in which most of its staff is young, underpaid, and overworked. Meanwhile, equity partners have a direct financial interest in the profits so quantity matters a lot more than quality.
Auditor job is to find material statement, inform that to client. And based on client's action, auditor makes an opinion.
So if the auditor makes unqualified opinion, it means that the financial statement does not have material misstatement.
It's like saying it's not the GP's job to find out if a patient has cancer. The GP may not have the tools but has to refer to the specialists whose job is to find out if the patient has cancer
David Risley there are certain situations that arise that not even an auditor can account for especially in cases of deep collusion amongst multiple companies. If everyone you are gaining information from is lying to you, and are doing an amazing job of presenting fraudulent information, even the best auditor would not be able to find fraud.
As a Big 4 professional - an auditor reviews financial statements, docs, processes, and accounting entries. Then they give their opinion. These are the core responsibilities. Forensic experts look for evidence to be used in court.
Let’s break this down: the firms themselves are paying for these audits. The smaller the auditor, the more they will rely on a particular firm for theIr overall financial viability. Therefore, incentive to look the other way and retain clients - regardless of potential fraud - will be inversely proportional to the size of the auditor. Spin off the consulting portions? Perhaps. But breaking up the auditors themselves is an awful idea. In a world where auditors are paid by the company they’re auditing, competition is actually not a good thing.
Exactly, the audit fees should be paid by public investors instead of audited companies.
The competition is a good thing if the other accounting firms scrutinize between each other.
For instance : PWC get a clients from Chevron. They get money from auditing that company.
Then, EY can look whether there is a fraud between PWC and Chevron. If EY found that PWC and Chevron made a fraud, EY can report this.
PWC and Chevron get fined and the money from the fine sent to EY as reward.
@@chaowang3303 public investors already paying the share of audit fees, dude. It decreases companies' profit, then less retained earning, then less dividen.
You got it right Kevin. Most companies will just fire the Audit company if they cause too much trouble and replace them with a cheaper look the other way firm. The Big 4 are forced to overlook stuff or lose clients. It's just business.
Chao Wang They are paid by the investors. Who do you think owns the companies? 😂
As a former employee from on of the big four, all I could say is that the procedures are not always the best nor rigorous. I did not be part of the audit team but the obsession with the complacency of the clients is always a big issue. In my opinion there has to be more competition in this industry and stronger laws to avoid this problems.
As a former Big 4 employee, I think Big 4 firms are overrated in every aspect, including their benefits and work-quality. If you want that Big 4 title, go ahead. But the title comes with costs. Personally, I'd recommend mid-tier and local firms that actually listen to their employees and try to provide better working conditions.
I AGREE WITH YOU 100%!!!
at what level however? Entry, Associate, Senior Associate, Manager, Senior Manager ... ?
You only stay at the big 4 for experience 6 - 12 months . No point of staying.
@@trebledc I have a good salary as an experienced hire, and so far the projects seem decent. I think a couple of years is worth staying
Nah... worked at BDO before PWC. I feel better at PWC tbh even.
Complexity, budget, and time will always be a problem and will only get worse
Firms need to be up front with the time and cost commitment. There is a reason why companies would request an audit 2 weeks before a board meeting.
10 years back my employer told me he is listening from start of HIS career that Big 4 are going to break.
Big 4 are not going to break, everyone is in it
You must be new here
-Ma Bell
The Big 4 operates as a multinational network, not a multinational company. Each entity is legally separate from the others. They just license the name and promise to adhere to a certain code of conduct/ethics.
Not even that, they operate several different legal entities in a single geography or country. This allows them to continue their work even one of the entity has been compromised or is under scrutiny.
@@anshuranjan32 Yeah, they even compete against each other for clients. I worked for KPMG in my hometown and we had a client two states away, KPMG had an office in the client's city and I asked
"why they don't provide staff for the audit or do the audit themselves instead of us going with only 2 people with a low budget for travel?"
Partner told me that bc then the other firm would get to bill the client or at the very least he would have to share the fees with the partner in the other city lol
There is significant cooperation amounts the network though, as well as global and regional leadership.
audits are not designed to detect fraud, they only provide a "reasonable assurance" that the financial statements are presented without any "material misstatements". The whole process is wacky since you are essentially paying for scrutiny from someone who you may not want to scrutinize you, creating a conflict of interest.
@@yashpandya6178 I can tell you have never worked on audit. It is not our duty to detect fraud, that's a separate service that the company has to pay for (yes, the very company who you are auditing, is the one hiring and paying you)
Clients don't hire you so you can spot frauds on them, they hire you so banks can rely on that information to calculate loans, shareholders can rely on the numbers to value the company & bankers can rely on the numbers for M&A & IPO's
Aslo, the amount of resources needed to go deep into the numbers & detect fraud is too much, the accounting firm wouldn't be able to work with multiple clients and make money as they would be stuck 3-6 months with a client instead of 2-3 weeks in a normal audit, and audit firms are in business to make money, not to serve as "police"
@@ThePorschefan finally some sensible person.
Oh! That's the problem, you're still too new to the industry, don't worry after 3-5 years of experience you'll understand it from a business point of view and not just as a student/entry level employee
@@ThePorschefan Not necessarily,if you work from a quiet reputed firm or Big 4 you can learn this in 1 or 2 years of Articles...
@@yashpandya6178 Have you carried on any listed company Audit or be a Part of it?
Do you know how a proper audit is designed? Do you even know SA's exist in the field of Auditing?
Do you even know sophisticated Fraud is very very Hard to detect?
So Basically according to your Point of view we need to sit with client for all 365 days and verify their Accounts? Are you kidding ? That's not Audit my dear that is Book Keeping that is done by Accountant or a team that is under the management...
We are here just to certify that based on our observation and the Samples which we take We give a reasonable assurance as to that the FS are free from material misstatements...
Reliance consolidated Turnover is 6 lakhs 50 thousand crores what do you expect us do ? Open and watch every entry passed in their Accounting Software ?
Do you know that these listed companies need to conduct Board meetings at the year end ? And what is the time available for an Auditor to verify the Books and certify the FS before that is given for approval in Board meeting...
Speak with some sense it is not Auditors are left just intact we have seperate Laws to guide our Professional Ethics and coupled with companies Act we are liable for damages caused to Shareholders if we are negligent in performing our duties....
Almost stands to reason that Consulting and Auditing parts of the big-4 need to be broken up with a church-state distance between them.
the term is a "Chinese wall"
Yes that church-state division that is so clearly held in the US 😂
@@ALittleMessi Honestly it's held too well. It's so well held in the US that now teachers are filling the void that would have been filled with religion with communist ideologies like critical race theory.
I worked at Enron and at a Big 4 and can safely conclude the Auditor's conflict of interest is the primary reason fraud still occurs. An accounting firm must not be able to engage in consulting work and business's and government should be required to turn over audit firms every 5 years to promote competition. They will still have plenty of work, just not guaranteed work.
The primary reason fraud still occurs is because audit isn't designed to detect fraud. If you don't know that I question if you were big 4 at all
@@ALittleMessi You're focus is on the trees and not the forest. The reason fraud occurs is due to how accounting firms are structured to operate globally. They are not incentivized to demonstrate cutting edge detection to boards and shareholders because profitability is what the latter two care most about. Governance is important but not at the expense of the stock/revenues tanking and expenses skyrocketing.
Accounting firms have to walk this tight rope to keep all three stakeholders (shareholders, board, management) happy and doing so (aided by legalese) without gaining a reputation for 'rocking the boat' that could undoubtedly impact the bottom line of their consulting practice, which could comprise 50% of total revenue. If accounting firms were obligated to focus strictly on accounting/auditing they would then be forced to demonstrate value to stakeholders to stay competitive. On the flip side, boards should be prevented from cozying up to their auditors so that they too can be held accountable for their performance by shareholders.
At the end of the day, an efficient market demands transparent and accurate financial insight from companies. If regulatory rules aren't standing up a structure that leads to this outcome, fraud is incentived.
@@sishaq12 the free market solves these issues
No. The primary reason why fraud still occurs is because the company being audited doesn't have proper controls, measures and deterences to prevent their employees committing fraud.
It is NOT an auditors job to prevent fraud. It is the responsibility of company management and corporate governance.
If you were an employee at a Big 4 firm (highly suspect because of your lack of knowledge) you have done a poor job in reducing the expectation gap between the public and auditors.
@@semi-skimmedmilk4480 ever heard of the phrase 'checks and balances'? Come out of the trees so you can see the forest.
EY is soon to become the new Arthur Andersen and Big 3 sounds too small for me. Nonetheless, people seem to confuse auditing with forensic accounting.
@@kingston163 So, basically if you read IAS (International Audit Standards) the main objective of audits is for the users to get financial and nonfinancial information that substantially resembles reality. I mean, accounting is really a fiction and a set of rules set by people to standardize information that can be interpreted in very different ways (that is: amounts, notions, ...etc). Now, there's no way possible that a three month audit is going to review every single process or transaction there is, so there's these statistical models and auditing tests that reveal MATERIAL errors (due to fraud or bad maths). Also, there's always a significance level for these tests and omissions do happen. Nevertheless, the design of the internal control procedures that allow for Enron type frauds are management's responsibility and an EXTERNAL auditor can never participate on their design. They can test internal control but due to restraints on scope can't go deep enough to FORM AN OPINION (in the accounting sense of the term).
For Forensic accounting look no further than what KPMG did with Wirecard. Stakeholders got reasonably angry because of the shadyness of EY's auditing and demanded answers. Wirecard hired KPMG to make a forensic review of an specific issue: Wirecard's subsidiaries and affiliates in Asia that were billing the parent for some shady services. You see? You've got an specific issue and scope and your objective is to find either fraud or error. You know where to look at.
I went all in because it's Saturday morning and have barely anything to do, hoped it helped.
@@kingston163 there's multicountry audits. Here in Mexico big 4 do the Mexican and, most of the times, also the regional part of transnational companies' audits. Year long audits do exist but are extremely expensive, generally only for big financial institutions. I mean, there's a limited amount of qualified CPAs in the world. There's not just money constraints but also educational system constraints and that can't be put on auditing firms. In general terms the cost of regulation can never be greater than its benefit. We've got a big challenge upon us as a society to find solutions for these dilemmas.
Why EY?
Good piece! No noise, good (historical) context, fact-driven
As a student of accounting who has been trying very hard to get into audit I can tell you that there are multiple issues. First, auditors are often overworked, so when a potential flag for fraud is discovered they will often overlook it if it can be explained away.
Second issue is that independence is never fully realized. Clients pay their auditors to audit their books. The firms are literally being paid to examine their books, if they actually find fraudulent financial reporting God help us all. The client will probably go under and then the firms loses a client and it's fees.
Lastly, auditors are just being paid to audit and verify that financials are accurate. Auditors do not guarantee that a company isn't failing or isn't insolvent.
You're right. But on your last point - the basis of the financial statements is typically going concern. If the business is not a going concern, but files statements as though it is, they are materially misstated. So the auditor must verify whether they are a going concern.
Your biggest mistake is aiming for audit. You have been brainwashed by your curriculum's big4 kool-aid
Continuity in audit teams is what is required here, ridiculous high employee turnover within means the seniors, managers and staff never have the deeper level of understanding of an entity's controls to be able to audit it to a very high level of quality. The business model in these big 4 also have to be criticality reviewed because it is all about taking in a high volume of grads and school levers, work them incredibly hard for 2-3 years and the expectation is that the majority of them should leave the firm upon qualifying so that they can take in the next set of fresh blood. In this increasingly complex financial world, that model is simply not fit for purpose any longer. The firms themselves know that this is at the core of falling quality. Lack of continuity in audit teams
Auditing is meant to be flawed. A higher scrutiny would mean a way longer auditing which will provide useless and late information and require the company to pay more for its auditing.
@KR I mean they literally teach you this day 1 of audit class. Very first chapter in the book. Only issue is normal people know nothing about it and just scream when a scandal happens
I still remember those insane timelines with little staff, we had to work 18 hours a day they would book hotels right next to the client office with no windows, seniors even mentioned that we should pretend that we did audit work. Usually we need 25 samples, we would sample say 4-5 if those were ok we will pretend that we did the rest. There was no way PCAOB or our review partners could detect it unless they redid the samples themselves.
Auditors cannot be independent when they rely on fees from the client, and the client needs to be happy, therefore a clean audit opinion may be issued when inappropriate.
Audit should be conducted by government agencies. But who would pay for it. That is the tricky part. Tax payers would suffer. I think establishment of big 4 itself was a shortcut solution which caused an issue till now.
@@editg121 Nah, governments would be worse. Fewer heads would roll and fraud would be less likely to be discovered. Take a look at how long it takes to build a highway.
When bank audits could be alloted independently then why not the audits under various statues.audit requires complete independence so that appropriate opinion is issued.all audits should be allotted by the authorities under specific statues wherein a portal could be developed and the client should be required to deposit the audit fees before hand.
Me: just entered one of the big four
CNBC: is it the end of the big four?
my life: why?????
Muhamad Naufal Congrats
Congratulations
It's not a bad thing, I've worked 1yr in the big 4 and I'm already depressed and want to resign
@crazy horse dance - Yes he should leave only once he's gained some experience at least on paper. Having a Big 4 on your resume helps in the future. It's upto him as to how to take his career further by learning in small to mid size companies.
In the US, the big 4 are regulated by the PCAOB, a subsidiary of the SEC, and they select audits every year for inspection. It’s highly regulated as it currently is, can’t imagine a breakup of the firms or a spin off of the audit practice.
Australia also has ASIC reviews
SA 200
Audtor can give only reasonable assurance that financial statements as a whole are free from material misstatements due to the inherent limitation of Auditing.
Are you in final or inter??
Reasonable Assurance*
@@abhishekrajpurohit7762 correct bro sorry for typo. iam inter student
@@shivamshahorignal Even I'm in inter bro
@@RichardCatalanoNY In many cases reasonable assurance isn't being given due to budget and manpower constraints imposed by the big 4 in order to keep their audits profitable. The incentive structure is also running the wrong way where. Public companies want to pay as little as possible for an audit; and want auditors to do the minimum amount of digging to get an unqualified opinion.
Well I believe most regulators do not realize that, for instance, if you are auditing a bank its quality depends on the quality of the hundreds of thousands of loans granted. If you put on top of that derivatives you are adding massive complexity... I bet even the board of directors can't have a clear picture of the bank's financial position. You may have a lot of tools to rate the quality of the loans but are they useful? How many triple AAA COUNTRIES got bankrupt in 2008?
Well, the ppl who audit that companies don’t have deep knowledge about financial engineering, fancy financial instruments, and sometimes all information needed to give a trustful report. And the interest conflict between consulting and audit speaks louder when you catch something wrong. They neeed to be break up: audit or consulting, not both.
Albuquerque68390 the video didn’t even go into the 2007-2008 blowup, much bigger than Enron.
Which 5 companies in the S&P don’t use Big 4 for audit?
and which one do they use?
They will most likely use Grant Thornton or BDO..
@@TheRealArjun206 BDO
There needs to be more than 4 companies auditing publicly traded companies. That’s a disaster waiting to happen all by itself.
I have worked for KPMG, India and all I want to say is everything in this video is perfectly true
In the video they claimed to have millions of employees. What they fail to tell you is that they are actually understaffed and overworked. This dilemma is an issue of corporate greed, not incompetence.
6:53 They did, KPMG uncovered the fraud to clean up EY's mess.
what fraud?
This shouldn't surprise anyone, like the old saying "Don't bite the hand that feeds you". The very idea of a company pays to have itself audited or rated is as absurd as me paying someone to write a reference letter about myself, yet "free market capitalists" have you convinced otherwise. Here is a simple fix - a non-profit investor funded audit company to audit all publicly trade companies.
Very true. Most of the audits result in unqualified reports as long as prior years were all unqualified. Auditing is a bull shit job in my view. Auditors pull the same sample data and as long as it is not blatant material fraud, they’re fine with it.
And like you said paying the auditing firms creates a conflict of interest. These firms want to retain your business for audit next year. They have their own portfolio of clients to retain for recurring revenue. It creates a cycle of bs.
James Gordon spotted the commie lol
Dummest comment here
It was "The Big Eight" when I started audit in 1986. Arthur Andersen, Coopers & Lybrand, Price Waterhouse, Arthur Young, Ernst & Whinney, Peat Marwick & McLintock, Deloitte Haskins & Sells, Touche Ross.
Four smartest guy in school who have duty to check all students homework in one semester within one week period, how do you think it'll be? 😁
Not the smartest for sure. Old school companies with little to no innovation and you call it smart.
@@editg121 smart as in they're the only ones who know enough to check and do the corrections out of everyone. clearly u aren't smart enough to be one of us
If we keep aside any possibility of malicious intent; still Big 4 partners engage with zillion of audit clients simultaneously with their limited team. Greed is the reason!
What does this mean?? An overburdened team/ resources with stricter deadlines are prone to miss critical information, reduced sample size and thus produce inaccurate reports, sometimes fatal.
👌
‘I wouldn’t hire you to do an audit of the contents of my fridge’ AHAHAH
The more regulated is the market of audit services from the outside, the more the problem of oligopoly in this market is getting worse. Because small firms simply cannot withstand such a high burden of government regulations, although they could easily provide services at the same high level as the big four.
I would never say they could easily do it, with or without regulation. The size and complexity of clients is insane, and a small company simply doesn't have the manpower to audit that. They could handle maybe 1 client a year if we are talking fortune 500
@@ALittleMessi It's standard practice even for big audit firms to work together with their competitors if they have a very big client and they need expertise in some geographical area in which they don't present currently yet.
The same could be with small firms so it's not the problem of size.
As a CPA who worked for one of the Big 8 firms, I can cite multiple material financial misstatements that existed in our publicly traded clients. I also watched the partners panicking trying to explain away the errors - even to the point of creating new GAAP right before our eyes. I would rather have this handled by regulators with fines and jail time for execs. The big accounting firms are basically well-paid whores for publicly traded companies wanting to perpetrate frauds on the investment community - pay then enough, and they’ll sign off on anything.
oh my, wouldn't be an accounting video without enron uttered at least once lol
They are racket, not accounting.
Tasty topic CNBC, nice one !
Economics in Action , seems more testy than tasty! Just saying.
I can only speak for PwC. We have detailed procedures to ensure our advisory work with audit clients does not create real or perceived conflicts of interest.
Pwc scam in Kerala who appointed swapana suresh
As auditors we do enough sampling to pass a company.
Companies are not willing to pay more money for a more extensive audit. Time is money.
The big 4 want to finish audits as quickly as possibly and move on to the next.
Let the insurance company step in!!! The company pays premium to the insurance company, then the insurance company hires the auditor. The more problems the auditor found, the higher premiums the insurance Co. Will charge the company. The auditor's life could be so much better. Role of "inspector plus service vendor" should not exist.
At least that way the incentive of all parties would be much better aligned.
@@harveypolanski755 exactly
Never thought of that but sounds like a great idea!
But then the company will just shop for the cheapest insurance provider with the easiest audit methodology
What would the company pay insurance for? There's no insurance company that will insure you for fraud, it's like insurance for a murder case. You've got an idea but forgot there's no product or market or desire from anyone for your proposed "insurance"
Well, the ppl who audit that companies don’t have deep knowledge about financial engineering, fancy financial instruments, and sometimes all information needed to give a trustful report. And the interest conflict between consulting and audit speaks louder when you catch something wrong. They neeed to be break up: audit or consulting, not both.
A general auditor's lack of knowledge about a unique asset class or specialized area of the business isn't an excuse. That's why they're allowed to bring in specialists (such as financial specialists) to help them with that part of the audit.
Biggest issue is the dependency risk... Companies pay for their audits directly, and hence why would an auditor "bite the hand that feed's it".
What they need is increased directly regulator audit and allow the BIG4 to focus on consulting.
The workers at these places are given heavy workloads and quality of work suffers. It's a mistake to think that the brand name automatically results in superior quality.
Not to mention partners throw an intern, 2 first year staffs and a senior to perform the audits lol. Just ocassionally a manager or partner will show up to check the progress made & make sure work will be done by the deadline
Unfortunately, Audit Firm size remain the proxy to measure audit quality, Big4 associate with high audit quality
@@ThePorschefan exactly bro,
I work at a big 4 company and my god what you are saying is true.
Until you can get audits paid appropriately for the work, you will find the expectation gap continuing to exist. Audits are criminally underpaid, and so the staffing to meet these audits are unsurprisingly, understaffed. It's also why the Big4 need to get other forms of work (tax, financial advisory, consulting) to keep the audit business going. It just isn't sustainable.
Loving the 1970s footage, like a time machine!!👍
Auditing and consulting should be separated
SOX.
As a person from big 4, I disagree. You can’t audit and consult the same client. You can choose only one. So why separate it?
Research has found no correlation on how these two department affects audit quality and auditor’s independence.
In Sri lanka one bank went bankrupt during early 2000. Auditor was KPMG. Afterwards demand for KPMG went up.
I'm hearing this question since I was born. But they are still thriving
Astonishingly I have seen no mention of KPMG in the Silicon Valley Bank fiasco. Its yield to maturity securities portfolio was nursing a $15 billion loss on a $91 billion asset pool. Equity? $16 billion. Yet the auditors were completely silent on the matter of going concern. I don't think that's corruption. It is simple incompetence.
Auditors are not responsible for detecting fraud
Pretty good summary. I've always wondered about objectivity and independence in the context of private accounting firms. I.e. when you have an audit client that makes up a significant portion of a partner's book there is always some level of incentive to lose objectivity to avoid pissing off the C level and risk losing the annuity. I don't know if there's a better answer but when someone's paying you to do the work, there are competitors that can take it from you, and it's a big piece of your book I don't think you can truly be 100% objective and independent as an auditor.
What is the point? Just showed me the history....
As a solution exchange should name and pay for auditing listed companies, charging the expenses to companies and thus avoiding conflict of interest that persisting today
Not the job of Auditors to find fraud. Our job is to find material mistatements if we find fraud we find it.
Whose job is Ut to find fraud then???
@@bulalirozani4392 Do you know how unrealistically impossible it is to go over every single piece of information of a multibillion dollar company? Especially when people are actively trying to deceive you? As an auditor, we do our best to provide REASONABLE assurance that the financial statements are fairly and accurately reported. We don't ever guarantee it.
@@bulalirozani4392 it is usually employees and executives colluding when commiting fraud. Most fraud is found by whistle blowers, mainly colleagues informing professionals of misconduct.
I love the historical graph...Andersen turns into Anderson.
They'll probably continue operating as usual for the foreseeable future. Thanks lobbyists!
And this is why I’m not going into auditing. There’s too much scrunity due to other auditors that work within the company.
Can’t be surprised, after seeing how they treat there employees... worked their for 1 year, avg salary per hour was 3-4$/h... they make you sign a contrat for a salary per week and make you work 60h-70h/week. They don’t have to give you minimum wage or pay you overtime because you are a contractor and not an employee.
I got an (final) interview in one big 4 next week. I’m currently employed in a national company from my country and they pay more than the big 4. BUT working in a big4 Will open so many doors from multinational companies (in the future after a few years of hard work ). So after all It is worth it? If someone who worked there could answer i would be very grateful thx
Seeing lots of experts in the comments as usual
The thing about Enron, a fascinating case I studied years ago, is that the company was playing a shell game that should have been obvious to any smart auditors looking at the business model.
Audit doesn't detect fraud
Big 4 aren't auditors...they are consulting firms! Their biggest revenue stream is CONSULTING. Big 4 will always remain Big 4 but they will evolve. Separating the audit and consulting service lines is a great thing but what real difference is it going to make - we can't audit and consult the same company right now anyway
The problem in audit is not that audit firms have other activities, as there is little interaction between audit services and other services.
The problem is that the client you audit is the one paying you. If they "bother" the firm, the manager will change auditor next time and won't comeback...
So Enron was E-Corp in Mr. Robot? Lol.
Was looking for this comment, also the similarities between Arthur Anderson and Alderson in Mr.Robot
Pretty much, except that E-Corp actually makes revenue, and in overall is much more competent than Enron, lol.
As a retired CPA, people might not understand accountants vs tax preparers, clerks and certified audits. Most accounting work, by far, is done in house by clerks and company accountants. Tax prep is by them, or by an accounting/tax firm. Above all this is the certified audit, for public consumption (i.e. quarterly reports, etc.) When a company certifies something, they put their fate on the line. It's hard, in a digital world-wide universe, to certify anything. Thus, only the strong, and lucky survive. The history of this field is fascinating and a subject you, no doubt, have never looked into. Some famous business events took down their accountants, too.
thomas aquinas the loss of the bedrock of accounting validity - the paper trail - disappeared years ago. It’s all built on a foundation of sand, silicon actually.
1 will collapse.
Probably EY.
Because other 3 are in emerging markets.
EY has been cooking up alot for banks and banks will continue to hide more and more assets of banks which makes them risky for investing in one
I work in Finance Law and currently work for a Big 4. I can tell you Deloitte was in several of my casebooks and not in a good way.
yeahh i do finance law too
Ex big 4 auditor here - AMA!
What's your favorite cereal?
Lots of experienced Auditors join their clients after 5 years in the audit industry. There’s always a familiarity threat if the audit methodology remains the same. And also with the experienced Auditors becoming the clients after joining the corporate having a higher position, there will be intimation threats.. although there’s safeguards for such threats, nobody can prevent fraud from happening just by having annual or internal audits..
Auditor should reduce that to an acceptable level otherwise they should reject the client
Federal must allot audit to Audit Firms , No one can select auditors on their own, Then Purpose might be fulfilled. Regards
PWC about to be burnt in Australia.
🤞
KPMG has already messed up in South Africa.
You talking about that Indian case?
What happened ?
Yip, but got away with it as usual
Worked for EY, in Virginia USA for 2 and half years. Wasted time. Never happened to me not to learn anything new at the workplace like at this place. I also couldn’t believe how NOT intelligent people at EY from Staff to Partner they are. Never seen something like that in my career. EY is now auditing government clients by WASTING TAX PAYERS MONEY!!! We already know that government is huge money waster, but now with audit companies auditing government we tax payers are being robbed twice. DISGUSTING!!!
I agree that audit and consulting should be separated in order to be prevent any clashes in conflicts of interest! It’s definitely not worth risking the loss of consulting revenue just because of some scandals from the auditing side...
Clear and concise. Nice job.
Most auditors don't even bother to understand their clients' businesses but focus on the "ticking-& bopping" of outdated checklists after checklists routines. The audit partners are loaded with huge fee budgets that they'd "swallow" garbage explanations "lock stock & barrels" from clients for fear of losing their business. The clients know these damn well.
The allowance of tertiary/ additional offerings lends itself to a clear path of conflict of interest. How can you offer "Management Consulting" while clearly and supposedly offering "Auditing" services to the same company?
PwC been cooking the books for Tesla for years
Can't say I know much about all the internal workings of audits, but from my limited accounting background I understood it as a silent handshake of I'll look at your books and most likely give some recommendations, see you next year. Easy to see if there's millions of dollars on the table that minor issues just get thrown into a clean opinion. (Can understand the flip side though cause you can only comb through so many books until you lose your mind.) Really interested to see how this ends up.
You are spot on with your assement. That is generally how it works. Another factor is if the audit company will play ball. If they don't they just get replaced with someone who will. Seen it happen many times!
No one in the consulting world sees the big 4 as “consultants”
All about MBB baby!
They make more money than MBB on consulting. That they're looked down by MBB doesn't mean they aren't paid just as much.
@@luisfer9361Oh Big 4 trumps MBB in revenues on consulting. Anyday.
@@luisfer9361 Big Four produces greater revenues than MBB because they do more stuff, but if you're a consultant you'd never take a big 4 job over MBB. MBB are the holy grail of consulting jobs and you 100% get paid more at every title at an MBB versus big 4. To the idiot saying big 4 consultants get paid just as well, you're an idiot. Starting comp at MBB for consultant is 165k not including bonus and big 4 doesn't come anywhere near that.
@@FXFXFXFX you've actually worked there? Where did you get those numbers from, bro? If you're talking about management consulting I must agree with you, pay is better. Nonetheless I meant they get paid just as much per engagement. But come on, on the rest of the consulting scope Big 4 does pay really well for roles north of manager. Now, for the $165k figure there's no way in this world that's an entry level position in any geography 😂. Starting roles begin at around 70k-80k. Being honest you just sound like an MBB fanboy from a nontarget school, but hey, I really can't be sure...
This is all I heard accounting students talk about and really didn't care because the RN program was more for me but I struck with accounting with an outstanding GPA and have the chance to work for the big 4s and still don't want to. stressing yourself trying to to get in won't gay you in but focusing on doing great is less stress and will. I want to work for a small company that pays well. I'm not being greedy for money but to love what I'm doing 😎
Big 4 offer hundreds of smooth audits, but let's focus on the 10 public scandals shall we. 😂
Yeah because they're the only ones that become public
They don't. They should all get out of business with their armies of trash accountants that can't even do basic journal entries and bill naive clients like crazy.
Audit expectation gap: the difference between the public's perception of the auditors roles and responsibilities and what the auditors roles and responsibilities really are
It is expectation gap auditors are not responsible to detect fraud.
So basically going by people comments we need to sit with client for 365 days and monitor their transactions and give Assurance on FS...
People confuse Book Keeping with Auditing...🙃🙃🙃
Me, a freshly graduated college student about to start at big 4: 😧
With the the current situation I will advice you look for something that can generate more income to you mate
I used to see forex as a side income but it has proven to be a major source of my income ever since I came across MR Jason, his experience of the forex market is unrivaled.
Congratulations
@Crazy Horse Dance I’m going into it expecting a terrible work environment but the opportunity to learn for 2-3 years, then great exit opportunities
@Fajitahmed Audit! Everyone I’ve talked to in advisory says it’s a lot easier (+ better compensation and no CPA required). Be careful about getting stuck, though. The exit opportunities aren’t as fruitful
most of the grunt work are carried out by graduates/ offshore team and interns. the senior managers and above, including partners, don't really give a shit, as they are raking in the big money - i.e. they are not the ones on the floor talking to the client every day scrutinising every detail.
The first years, with the offshore team and interns, have no chance in providing adequate work quality. The training, as the big 4 continues to claim is world class, were absymal in reality due to the low pay and long hours, which push away the talented seniors who probably have the only chance of finding stuff like this as they have a few years examining the company under their belt.
Companies see these as just a cost centre and a mark from the big4 should not be seen as gold standard.
If anything they will gain more clients. You are missing the biggest point of them all, Money and Power. Big 4s have power to undercut competition, even if it means that they have to pay for the auditing of the client. I have seen it first hand, I work for one.
The solution seems obvious to me. Companies should not be able to pick who audits them. You need an audit for some reason? You go to a central authority who starts up a preliminary audit into how much they think it should cost (which is correlated with how much work it will take), then goes and finds a firm of the appropriate level, so the company being audited can't complain that they're being overcharged because whoever they went with they'd get charged the same amount, and the auditing firm can't rack up costs because they're paid a flat fee determined by someone else. The major problems are making sure that the central authority does a good job pricing audit jobs and doing peer review on the firms that accept the work to make sure it's being done well. It seems like a much better model than what we have today, and it doesn't even have to be a governmental authority - there are CPA societies everywhere that are not part of the government but act as a professional association that could be the backstop of the central authority, so that it would be a "free market solution" as opposed to one being implemented by the government. All the banks and regulators have to say is "we want audited statements, but you can't choose your own auditor" and once such an authority exists, it's reasonable to make such a demand, and would cover their backs much better than how it works now.
The reason that these large firms fail to detect fraud is in large part because the guidelines on auditing are extremely vague. For the most part, there are no hard and fast rules about what you need to confirm with outside parties; the auditors are just supposed to use their professional judgment in order to determine the most effective ways in which material misstatements might be uncovered. With the pressure to keep costs low, it's not surprising that their judgment can be clouded and deciding less thorough procedures are necessary than they might think otherwise if it weren't for the goal of keeping the bill down. And certainly I don't mean to say that there should be hard and fast rules, because every company is different and there are different risk factors at each one that demand different approaches from the auditors. Unfortunately, the large audit firms didn't get large by being good at uncovering misstatements - they got that way from being good at finding customers. I don't have any experience outside the very small firm that I work for (2 other CPAs), but I had a co-worker who started at a Big 4 firm, and he was just absolutely awful in terms of caring about the quality of his work and seemed to care way too much about keeping the billing in a region the client would easily accept than making sure things got done right. There absolutely needs to be a mechanism where auditors are not capable of being fired for billing too much, and that pretty much requires an outside authority to decide how much it should cost before the auditors are brought in, or else the opposite would be the problem.
Why Satyam fraud of PWC not mentioned 🤷
vamshidhar reddy that was in india, he mentioned Enron of USA
😳
@@candyfloss184 He is talking about Big four global clients
Excellent video. Very informative