No anarchist, the former Big Four counsel-turned-professor suggests that the collapse of a Big Four firm (or two, or three, or all) would barely be noticed in the financial markets:
Peterson
If the now-standard auditors’ report were suddenly not to be obtainable from any source, who would miss it?
Should the stock exchanges be closed, if a Big Four failure meant that one-quarter of the large listed companies lacked an audit report? Could those companies’ securities be barred from trading? Unthinkable.
Out where capital really flows and trade is actually engaged, the world’s markets would shrug, start the process of designing new forms of assurance from a blank page, and move on.
And the splintered pieces of the former Big Four would provide ample building blocks for a new assurance structure.
What would the new “structure” look like? That’s the question. And why aren’t smart firms moving there already?
As for why the firms aren’t going there — I’ve written on this — see my archive for July 11, 2009. A very quick summary is that their leaders are hand-cuffed to the present model, unable to break their partners from the revenue and unable in this litigation environment to offer or sell new kinds of assurance to their clients.
As for structure — to avoid catastrophic collapse, one possible scenario is federal chartering, so long as there is a real blank-page approach to the regulatory and liability issues. Again, see my archive for June 10, 2008.
One Response to “Who Would Miss the Big Four?”
Jim Peterson
As for why the firms aren’t going there — I’ve written on this — see my archive for July 11, 2009. A very quick summary is that their leaders are hand-cuffed to the present model, unable to break their partners from the revenue and unable in this litigation environment to offer or sell new kinds of assurance to their clients.
As for structure — to avoid catastrophic collapse, one possible scenario is federal chartering, so long as there is a real blank-page approach to the regulatory and liability issues. Again, see my archive for June 10, 2008.
Jim Peterson at Re:Balance