PwC fined over exam cheating involving 1,100 of its auditors
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This is some major BS right here. "The rogue engineer", "the junior staff", etc. I've seen it more times than I can count, this was organized by management because with all those certifications junior staff can be sold as experienced. I've seen such "juniors" not being able to understand even the language used in a meeting despite ostensibly being the most qualified people in the room.
Audit is the area in which this happens most of the time because it's where all the legitimacy and plausible deniability come from. And I know all major EU institutions tried this at least once in their existence: put junior auditor staff with creatively obtained certifications on what were supposed to be senior positions then when some bubble burst in the media everything was spun with the same wording as above. Just some misconduct of junior staff with no knowledge or involvement of senior management (I'd wager that as we speak ~80% of auditing staff in all EU institutions is junior or inexperienced staff).
In reality this happens either to extract more money for low value individuals or to provide ass covering for senior management, boards, presidents, and CEOs, by giving them the possibility to say their best intentions and actions were derailed by a rookie mistake from an inexperienced employee.
And launch a PwCoin ICO.
To the dedicated anti-crypto downvoters out there: will you consider appreciating the sarcasm, please?
Quis custodiet ipsos custodes?
Given that the public service sector tends to pay shit, I'd tend to agree with you - and that worldwide, not just the EU. Not really surprising that any kind of major government-run project ends up in some form of clusterfuck - be it nuclear plants, major IT overhauls, construction of new roads or railroads, construction in general... wherever the erosion of the tax base following the rise of neo-liberalism hit, in-house expert staff able to exercise oversight of projects was the first to be let go and replaced by externally hired staff.
Oh this is certainly not that. Plenty of those institutions pay more than any reasonable job in the private sector and yet audit departments usually stand out by being filled with juniors to a much higher degree than others. The ECA might actually be the exception, these days I wouldn't know.
Imagine if the president of any such institution would be outed in the media for knowing about something critical which needed action as highlighted by an audit report but swept it under the rug. Being able to turn the narrative from "maliciousness at highest levels" to "mistake/incompetence at low levels" makes all the difference. Some of these institutions paid juniors (freshmen with a couple of years of audit, or senior employees but with no auditing experience) close to 5 figures in net monthly salary just for the benefit of having this plausible cover of "junior mistake". For anyone not familiar with the European job market that's a lot, especially for a person implicitly tasked with doing a superficial job.
If you work for the EU institutions, first of all your remuneration used to be(1) good, esp. for not northwestern EU countries. Secondly, your tax exempt on certain things such as buying a house or car. Stuff like that adds up.
(1) until about 10-12 years ago; I think it became less, but still not bad. I remember looking at a position once that half-matche me; salary was about double my then-current salary (which itself was quite fine).
It might be better in industry, but it's far from bad in the EU institutions.
You're right, but it's a shame to guess when the PCAOB release made it ultra-clear:
"Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm"
Their business model is to hire those people and claim they are way more experienced than they are. Afterward, they lease them to some client for 6-12 months.
I find their business model incredibly annoying, but the thing that actually worries me is that many of those clients are public agencies, regional governments, etc.
Virtually all citizens are forced to consume the crap built by PwC and their competitors.
You want to change the team? Send the resume, let us meet the proposed staff and run the bullshit detector over them, and then maybe negotiate changes in cost if they've downgraded or reject the change if its unnacceptable.
If they insist, they're in breach and we go after their performance bond and let the insurer go after the dishonest consultant.
I walked past one such hire on the job afterward, and noticed that the code on her screen made a line from the upper left to the lower right corner. Closer inspection revealed that she had written 32 nested statements to iterate through the 32 characters in a part number (used by our clients for military equipment).
After leaving 5 years later, I went to PWC (then just Price Waterhouse). They did not have their shit together nearly as well as Andersen, let me tell you. So... that's kinda scary.
Naturally , there are poeple setting the guidance on the work itself i.e. which signature should be found, and where you should document it. But those jobs are very limited.
Thats why their project teams are so tilted towards juniors. Simply put, most of the work available is grunt work. A construction job needs 1 architect, 1 engineer, and many laborers. Its not very different here. There is a mixed bag of talent in those ranks.
There is nothing wrong with staffing projects accordingly. The blame on juniors, when it hapoens, is a escapism which should be easily disarmed by anyone knowing what they are doing.
This hierarchy is true for most audit firms. This may not apply to the consulting arms.
The product sold is not a miracle drug. People understand those with talent are setting the steps to be performed and are the sleuths with the hound nose for fraud. Clients are paying paying for that talent and the experience.
It's very different here. On paper those certifications junior auditors get make the difference between "guy with hammer" and "engineer". These juniors are sent in as capable auditors as soon as they get those certifications pinned to their chests. At best they have a lead auditor checking up some of their work.
Very few builders intend to use "guy with hammer" as an architect or engineer with the purpose of introducing flaws in the result. While in audit it happens in so many cases because the audit report more often than not is intended to miss on several findings under the cover of "junior mistake" if ever caught.
Book knowledge != real world skills
This is too generous. The talent and experience didn’t prevent 1,100 of their own people from cheating. They didn’t prevent Enron, Bernie Madoff.
“The guy with hammer” eventually gets promoted to Manager or Partner and then continues to see everything as a nail. But the hammer in this case is bunch of checkboxes.
It’s incredible to see in my organization that Internal Audit now has some responsibility reviewing corporate internet security. Auditors running around with CISSP certificates. The result is a bunch of checkboxes.
The auditor report on financial statements is now just a required check box without meaning. The hound noses for fraud are now the active investors, which try to untangle the obfuscated financial statements. When was the last time you saw anyone use Net Income as a indicator. Everyone tries to undo the accounting adjustments and look at EBITDA.
No, it not needs to be done. This kind of job is literally what was defined as a "bullshit job" - any decent computer-first designed workflow would not need a human be involved for such crap at all.
The problem is that minimum wages are too low, so companies don't have an incentive to spend money on introducing efficient, fully IT-centered processes... after all, why spend millions of dollars on a risky IT project when you can hire people for that?
This would suggest that, if the profession existed before it became a regulatory requirement, then there was a need for the profession.
If many are willing to pay for the job, then by definition, the career cannot be bs. Money speaks louder than words.
Now if the current job has become a frankestein of its former self, that is an issue (or those unnatural parts can be said to be bs), but that does not mean that the practice itself is BS.
These were internal training that could be used to satisfy professional accounting designation's annual Continuing Professional Education (CPE) requirements to renew your profesional membership (so you could continue using your chartered accountancy / CPA letters after your name).
"The Firm has designed its training program to serve multiple purposes, including to provide Firm personnel with technical instruction, to further their professional development, and to satisfy some of the continuing professional education requirements imposed by the accountancy boards that grant CPA certifications to the Firm’s auditors."
It was not just the juniors. Even partners are involved:
"Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm."
I am surprised that this was self-reported, and I applaud them for that.
[0]: https://cpab-ccrc.ca/docs/default-source/enforcement/2022-en...
[1]: https://pcaob-assets.azureedge.net/pcaob-dev/docs/default-so...
You can have that authority while being unable to answer silly exam questions, and you can lack it while scoring perfectly.
What we don't want is a society where we think people are competent and disinterested based on how well they did on some test. That leads to people cramming for tests, cheating, and avoidance of difficult choices.
They're also working absolutely insane hours, especially during "busy season", and are expected to complete the training in their spare time or time off. It's usually tied to your bonus too, if you haven't done the yearly training you've worked for nothing. Anyone in their shoes would have looked for the answers to save 40 hours of bullshit training on top of an 80-100 hour work week.
The reason this is so scandalous is that a company whose differentiator is its integrity just demonstrated a gaping hole in that area. There is a conflict of interest in every audit that is sponsored by the organization being audited. How are we now supposed to believe the results of PwC audits that are favorable to the hand that has been feeding them when they've showed a willingness to compromise their principles for their own short term benefit.
I always thought that the point was to be able to say "see, someone signed here and said everything was fine!" for a fee. You shop around until someone is able to provide that signature for a reasonable amount.
But that's fine. If you have a crack in your foundation you want to know about it, not to be forced to fix it or for the whole world to know about it. You can decide for yourself having the full knowledge of the situation what you need to do next and take responsibility for that decision. Or you can pretend you never knew and whatever happened is not your fault. This is the critical role of an auditor, to point out the reality so you have to be accountable for whatever comes next.
And this is exactly why many companies pay for or hire junior/inexperienced auditors. So they can go through the motions without the accountability.
That might be a company proving to its shareholders that their accounts are in order, without publicly releasing every last deal and detail. If the accounts say Google's got a billion dollars in the bank, investors having someone check they have a bank account with a billion dollars in is basic common sense!
The practical purpose of auditors is a lot less clear, because companies get to choose their own auditors, and nobody hires auditors with a reputation for being difficult...
i don't know how that makes me feel. salty? probably. i have given a lot to this endeavour without an end in sight. by law that makes me unfit to be an auditor, oh well, exams count. funny how you become a professional "after" you finish theoretical exams like an auditor and if you do it by any means necessary, you are told you are a professional now.
i am ranting at this point now. sorry
https://en.wikipedia.org/wiki/Arthur_Andersen
your rewritten response is appreciated, for the record
"In 1989, Arthur Andersen and Andersen Consulting became separate units"
"The two businesses spent most of the 1990s in a bitter dispute."
"In August 2000, at the conclusion of International Chamber of Commerce arbitration of the dispute, the arbitrators granted Andersen Consulting its independence from Arthur Andersen"
"As a result, Andersen Consulting changed its name to Accenture"
Either the sales teams in these companies must be on another level or the price is just unimaginably cheap.
they have connections and clearances other companies can't access
It is reasonable to assume that most of the problems with the audit firms are endemic both within a network and likely across the networks. What they're doing is very close to useless, they're not very good at it, and yet they reap enormous fortunes from doing so.
Governments are now scared to do anything about it - even just digging into some of the obvious problems, because "Scandal at audit firm" is how we ended up with a Big 4 instead of a Big 5. Arthur Anderson was destroyed by what was uncovered when Enron blew up.
I believe the right fix should be inspired by the Paris MOU, the mechanism by which European ports instituted Port State Control as opposed to Flag State Control.
Under the Paris MOU, Flag States remain responsible in principle for proper oversight over the ships flying their flag. But the European ports inspect some of them to see if that oversight has been effective, and if they're non-conforming they are detained until the problem is rectified.
The inspections result in data, and the data is analysed and then - this is the clever bit - that analysis informs future inspections. If the inspections of vessels flying flag A mostly came up with nothing, flag A gets whitelisted and next cycle few inspections occur for flag A. On the other hand if the inspections for flag B keep finding problems, flag B gets blacklisted and next cycle more inspections occur for flag B. This is repeated forever.
https://www.parismou.org/detentions-banning/white-grey-and-b...
For a ship owner, inspections are annoying and cost money but on the other hand some registers, especially "Open Registers" (aka "Flags of convenience") may be cheaper (and their lax standards might let you avoid doing maintenance other registers would have required). The Paris MOU's rules mean that if you pick a notoriously bad flag because it was cheaper or easier for you, you're going to spend a lot of time sat in port not making any money, either detained or being inspected. So, even if you choose a cheap flag you'll look for one that isn't blacklisted. This has the effect of raising standards without costing lots of money for the Paris MOU's members to inspect everything constantly.
I think countries should hire their own relatively smaller team of auditors, and re-audit some of the companies that get audited, and then not only act on the result of the re-audit (e.g. fining or winding up businesses where the government's auditors found problems, fining audit firms that missed obvious problems) but also analysing the results of the audits to put audit firms (including but not limited to the Big Four) into white/ black lists and re-audit more or less of their future work accordingly. The incentive becomes: Pick an audit firm (Big Four or otherwise) that is whitelisted, so that you're less likely to get re-audited.