When the fox is the keeper
The tales of the cunning fox deceiving other animals are integral to our childhood. In one of these stories, this mother crocodile leaves her five babies with the clever fox to tutor them.
Every morning when the mother crocodile came to check on her young babies, the fox who was devouring them one by one would fool the crocodile by showing the same baby several times until there were none left to show, and the devastated mother then realised all too late what a fool she has been.
The story's moral is that trusting the wrong person can have severe consequences, especially when we trust big companies like the Big 4 without fact-checking their malpractices.
In the society that we live in, we have all had our fair share of foxes. While bankers are there to protect the public money, they are also busy on their fortune sprees. While lawmakers make laws to improve life, it is often the lawmakers themselves who believe they are above those laws.
Coming back to the Big 4, I had earlier written an article titled "Our Love for Big 4!" in which I shared some real-life stories that highlight how their greed for profit supersedes their business ethics which is core to their business.
Recently, PWC in Australia has come under intense political pressure after it was revealed that its top executive shared with other PwC employees the government's confidential plans to combat tax avoidance by multinational firms. They used that information to tailor tax avoidance plans for multinational firms, including Silicon Valley tech giants. The partner who worked on the Australian government tax assignment shared the confidential information with as many as 50 partners or employees.
"We are committed to learning from our mistakes and ensuring that we embrace the high standards of governance, culture and accountability that our people, clients and external stakeholders rightly expect," said Kristin Stubbins, acting chief executive of PwC. It is not about learning from mistakes but making money at any cost.
The annual revenue of the Big 4 ranges from US$34 billion to US$59 billion in 2022, according to Statista. The usual fine for non-compliance ranges from $1 million to $100 million, a negligible sum against the revenue. Such low fines, mostly in developed countries, encourage them to carry on with their unethical practices.
Considering the repeated conflict of interests, EY proposed to split into two separate businesses: one for audit and the other for advisory and consulting services. While EY expected the competitors to follow suit, the other three stood their ground because of the anticipated impact on revenue. Now, EY may backtrack from its original position.
The idea of a Big 4 split was first mentioned in a report by a UK parliamentary committee following the collapse of the construction group Carillion in 2020. The UK accounting regulator directed the Big 4 to split by 2024.
Developing countries, including Bangladesh, should muster up the courage to dissent against the unethical practices of Big 4 or alternatively have some control over them. The Financial Reporting Council may consider forcing these firms to split their consultancy and audit businesses as UK regulators did. Another point to consider is to look for subject matter experts from international or local markets instead of the Big 4.
We have little or no control over Big 4's operations in Bangladesh. Rather, our government and big corporates rely heavily on their services due to their perceived acceptance by the authorities. They are, in fact, used not as much for their reliability but to save their back in the face of a finger being pointed. About time to get alert!
The author is founder and managing director of BuildCon Consultancies Ltd