Book about Big 4 set to explode onto market

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Journalist Richard Brooks is about to publish a book about the Big Four accountancy firms that, according to CA and professor of practice in international political economy at the University of London, “have a Darwinian system that ensures those with ethics don’t stay. That resonated very strongly with my own experience. The cost to society of this perverted form of Darwinian selection has been very high indeed.”

Brooks, also the author The Great Tax Robbery, writes about the role of KPMG, PWC, Deloitte and EY in inventing tax avoidance schemes and corporate corporations tax avoidance that cost countries billions of dollars in taxes.

The new book, Bean Counters: The Triumph of the Accountants and How They Broke Capitalism is to be published in next month. Earlier this week, The Guardian published a short summary by Brooks. Here are some excerpts:

“Accountancy used to be boring – and safe. But today it’s neither. Have the ‘big four’ firms become too cosy with the system they’re supposed to be keeping in check?”

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“KPMG’s founders had made their names forging a worldwide profession charged with accounting for business. They had been the watchdogs of capitalism who had exposed its excesses. Their 21st-century successors, by contrast, had been found badly wanting. They had allowed a series of US subprime mortgage companies to fuel the financial crisis from which the world was still reeling.”

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“When late-20th-century bankers began gambling with eye-watering amounts of other people’s money, good accounting became more important than ever. But the bean counters now had more commercial priorities and – with limited liability of their own – less fear for the consequences of failure.”

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“Just four major global firms – Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG – audit 97% of US public companies and all the UK’s top 100 corporations, verifying that their accounts present a trustworthy and fair view of their business to investors, customers and workers. They are the only players large enough to check the numbers for these multinational organisations, and thus enjoy effective cartel status.”

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“Despite the economic risks posed by misleading accounting, the bean counters perform their duties with relative impunity. The big firms have persuaded governments that litigation against them is an existential threat to the economy.”

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“When it comes to setting the critical rules of accounting itself – how industry and finance are audited – the big four are equally dominant. Their alumni control the international and national standard-setters, ensuring that the rules of the game suit the major accountancy firms and their clients.”

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“The long reach of the bean counters extends into the heart of governments. In Britain, the big four’s consultants counsel ministers and officials on everything from healthcare to nuclear power. Although their advice is always labelled “independent”, it invariably suits a raft of corporate clients with direct interests in it.”

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“The major accountancy firms also avoid the level of public scrutiny that their importance warrants. Major scandals in which they are implicated invariably come with more colourful villains for the media to spotlight. When, for example, the Paradise Papers hit the headlines in November 2017, the big news was that racing driver Lewis Hamilton had avoided VAT on buying a private jet. The more important fact that one of the world’s largest accountancy firms and a supposed watchdog of capitalism, EY, had designed the scheme for him and others, including several oligarchs, went largely unnoticed.”

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“The big four now style themselves as all-encompassing purveyors of “professional services”, offering the answers on everything from complying with regulations to IT systems, mergers and acquisitions and corporate strategy. The result is that, worldwide, they now make less than half of their income from auditing and related “assurance” services.”

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“Where once they were outsiders scrutinising the commercial world, the big four are now insiders burrowing ever deeper into it.”