Alumnus Book Release “Count Down: The Past, Present and Uncertain Future of the Big Four Accounting Firms”

Emerald Books – second edition – July 2017 (its page on Amazon)

BY Jim Peterson, Counsel, Arthur Andersen Worldwide (1982 – 2001)

It is a pleasure to share here the publication by Emerald Books of the second edition of “Count Down: The Past, Present and Uncertain Future of The Big Four Accounting Firms."


The post-Enron disintegration of Arthur Andersen in 2002 reduced to the surviving Big Four the number of international accounting firms that audit nearly all of the world’s largest public companies -- Deloitte, EY, KPMG and PwC.

Despite their strengths -- market dominance, double-digit annual growth in non-audit services and continued global revenue expansion – there are serious threats to both the viability of the Big Four and their business model:

  • Widespread dissatisfaction with the standard form and language of their core product -- the traditional “pass-fail” auditor’s report.
  • The persistent “expectations gap” between their perceived performance quality and the stated desires of information users.
  • Difficult relations with regulators and oversight agencies.
  • And especially, the questionable ability of the Big Four and their partners to survive a “black swan” financial shock – a litigation judgment or law enforcement sanction on the scale that destroyed Arthur Andersen.

“Count Down” looks at the complex challenges facing the Big Four, questions the feasibility and achievability of the various proffered “solutions,” and proposes an evolved model for Big Audit that would be both sustainable for the large firms and fit to serve the capital markets of the 21st century.

Duane Kullberg’s Support

Duane Kullberg was managing partner and chief executive of the Firm in 1982 when I accepted our management’s invitation to join the nucleus of four lawyers that comprised the original in-house legal group. He generously puts his view this way:

“This book lifts the lid on the story behind the financial statements of the world's major companies. If you want to understand the system that is allegedly validating the reported data - and why the system is a clone of the Maginot Line - expensive, obsolete and irrelevant - read on. Weak as the present system is, there is a solution. It will take a major change in regulatory attitude and a fresh approach, unfettered by history. The section on the imaginative use of Big Data is worth study by itself.”

This Second Edition

In December 2015, Emerald aimed the first edition at its core academic and scholarly market – thus low volume and at a cover price-point that was understandably resisted in the broad reader market. This trade edition is now revised and extended, and priced – in both softcover and e-reader versions -- for readers in accounting and the other professions, corporate management and governance, finance and investing.

The new “Count Down” brings into its updated narrative recent developments affecting the Big Four and the fragility and threats facing their business model - for a free view, see the link on Amazon, “LookInside.”

Included are developments since the first edition, affecting the Big Four and the fragility and threats facing their business model. Brought into this updated narrative are:

The Big Four’s growth to collective global 2016 revenue of $ 128 billion, and the structural implications of the continued growth disparities between their Audit and Advisory practices.

The imposition and implications of mandatory auditor rotation under legislation and regulation in the European Union; and in the US, the PCAOB’s requirement to name lead partners on public company audits.

New examples of corporate financial malfeasance, regulatory and law enforcement proceedings and potentially disruptive auditor litigation, involving each of the Big Four and their large global clients – of which a partial sample here:

  • Deloitte’s Brazil firm in December 2016 incurred an eight million dollar penalty, the largest ever imposed by the PCAOB, and practice bars and other sanctions against twelve partners and employees, over confessed alteration of documents, false testimony and lack of cooperation with the PCAOB’s inspections and investigations.
  • EY in September 2016 was the target of two SEC enforcement actions, involving censures, fee disgorgements, fines and practice bars against its personnel, over charges of loss of independence based on “close personal relationships” between engagement partners and client personnel -- in one case a romantic relationship and in the other, significant expenses paid for travel, entertainment, sporting events tickets and family vacations for the client CFO and his family.
  • KPMG in April 2017 fired five partners and an employee, including its Vice Chair of Audit and its head of Audit Quality and Professional Practice, over its receipt and handling of advance inspection information leaked by an employee of the PCAOB.
  • PwC’s delivery of the wrong “best picture” envelope, and the resulting tumultuous ending to the February 2017 broadcast of the Academy Awards, evoked outbursts of public ridicule -- although the significance of the debacle was pale compared with the potentially fatal financial impact of two multi-billion dollar lawsuits, relating to its audits of Colonial Bank and MF Global, where jury trials in process in August 2016 and March 2017, respectively, were discontinued in favor of settlements for confidential amounts.

This new edition also expands in scope and detail on the required re-engineering by which – with the necessary but unlikely mutual cooperation among financial statement issuers and users, the accounting profession, legislators, regulators and agencies of law enforcement – a sustainable structure for financial reporting and assurance might emerge -- that is, a Big Audit model truly fit to serve today’s global capital markets.

As we have lived together through the aftermath and consequences of the Firm’s collapse in 2002, and the unlearned lessons that leave the current Big Audit model in its fragile state, the issues here have direct meaning and impact for all of us -- not only those still active in the Big Four and the smaller but no less affected firms, but also those working in or serving as directors for public companies and their clients and investors who rely on robust audited financial statements, and – last but not least -- for all who hold the securities of public companies in their savings and retirement funds, Keoghs and IRAs and pension funds.

It was my privilege to provide legal counsel to the Firm and its personnel for 29 years, both outside and in-house – dealing with some our most grave and troubling litigation, disputes and practice quality issues. I sought always to address those difficult and challenging subjects under our shared principle of “think straight, talk straight.”

In that spirit, I hope you find “Count Down” to tell a worthy story. Comments are invited and welcome -- importantly on Amazon — more especially, by way of sharing with friends and colleagues, clients or otherwise. As for any disagreements or criticisms -- feel free to write me directly at