When should a company question the credibility of a Big 4 consultancy?

Many of us will remember when Arthur Andersen collapsed after it became entangled in the Enron scandal in 2002. Many wrote off the large US consulting firm, and following the impact it caused, the likelihood of another large consultancy collapsing seemed slim. However, this year, there has been a steady stream of damaging news that involved the Big 4 auditing giants, KPMG, Deloitte, EY and PwC.

Auditors play a critical role in the economy and one comes with responsibility. The law guarantees demand for their services by requiring public companies to produce audited financial statements which provide information for investors and people interested in the company’s condition.

The Big 4 also do strategy consulting, IT and tax advice. But for this work, they answer to the company’s management team. These other tasks may enhance auditor's understanding of their client's businesses, but they can also create conflicts — particularly when they account for a large share of the auditing firm's billings.

In the UK, it’s been reported that all four companies were involved, in some way, Carillion’s collapse; Deloitte was their sole internal auditor, KPMG served as their external auditor, EY gave turnaround advice and PWC advised the company on its pension schemes.

This year, India’s securities regulator banned PwC from auditing listed companies in the country for two years after it failed to spot a $1.7bn fraud at the now defunct Satyam Computer Services.

In South Africa, KPMG has been banned following its role in a high-profile bank failure and ties to the controversial Gupta family.

Oman’s securities regulator suspended KPMG from doing new work for a year after finding major financial and accounting irregularities at some listed companies.

Are the globe’s giants turning a blind eye to financial irregularities, compromised because of the lucrative fees they extract from the companies that they audit?

As the more expensive option on the market, companies pay a significant amount for ‘the brand’ rather than the expertise of the actual people doing the work. It’s well talked about that a director-level consultant will pitch and ‘win’ the account, and junior consultants (some even fresh out of University) will come in to implement the work.

Business strategy is my art. I have over 20 years', hands-on experience from working on over 100 companies, all around the world. I am always proud to tell companies this. And I like to get my hands dirty, so to speak; not only do I create the entire strategy but I implement it also, rather than have someone less-experienced do it.

Not only is the quality of work consistent, but it’s also cheaper – you do not have to pay for that big corporation brand name.

Which then leaves me to ask, if the Big 4 brand name doesn’t have the same quality associated to it, the work is losing its substance, and people are questioning their reliability, then is the extra cost worth it?

Let me know your thoughts.

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