HOW MUCH IS ENOUGH?

Over the recent months, as has been noted in this Blog we have been commenting on the goings on at the Banking Royal Commission.  One key and growing concern was the potential involvement of the major accounting and legal advisory firms who, in the background, would have been advisers to both the banking sector, as well as to the regulators.  Given the evidence of endemic behaviour it is an increasingly viable concern.

By the end of this week my mind is simply beginning to explode!  With the announcement yesterday of administrators being appointed to RCR Tomlinson, we today cop the facts that less than four months ago the group had its 2018 audit signed off without qualification, and then almost concurrently it did a $100M capital raising, with a fully compliant Investigating Accountants Report attached.  Both performed by a large advisory firm, and in fact both performed by the same firm; there’s just nothing like an independent set of eyes is there?

As if that’s not enough, moving away from the AFR we cross to today’s Telegraph and their exposé on the information taken to the Australian Federal Police relating to the activities of the National Branch of the RSL which appear to potentially cover a 17 year period.  Again with large firm involvement (top 30 at least) with their accounting, audit and advisory.

Other issues where the independent performance of professional firms over recent year has been questioned have included various RSL state offices, CPA Australia, ANZ re executives recruited from its auditor, Carillion in the United Kingdom, GE and Wells Fargo in the United States.  Additionally regulators in the United Kingdom are currently giving serious thought to forcing a breakup of the largest of these firms.

Getting advice these days is extremely accessible, there is a myriad of sources, just ask any small business owner; but finding the right one is the difficulty.  Simply because there is rarely surplus cash flopping about in small businesses.  Thus successful small business operators get very astute about getting good advice at a fair price.  However, where fee generation is the predominant performance measure in side businesses, value for money and independence can often just slide out the door, or should I say “reasoned around.”

Notwithstanding the points above the names of these firms litter preferred ‘professional panels’ across almost every government department, bank, regulatory authority, and other major institution to the extent that challenging the findings of such firms can often be beyond the reasonable/affordable cost of those involved.  Whilst worthy of further expansion, for the moment I will leave this thought as is.

Enron was Arthur Andersen’s demise, what will be the professions? … Industries that admit that they can’t properly operate AND be compliant with the law? … Techs that lose a billion a quarter, consistently? … Corporate giants that simply run rough shod over anyone and anything?

Then maybe, … I might just simply be over-reacting.