Comments on: Traditional partnership model being tossed aside http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/ From external to internal audit Thu, 15 Jul 2010 12:13:59 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Neil http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/comment-page-1/#comment-870 Neil Tue, 13 Nov 2007 05:01:16 +0000 http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/#comment-870 Francine, would mandating frequent auditor changes (every 2-3 years) improve this situation, or would the increased costs outweigh potential benefits? Francine, would mandating frequent auditor changes (every 2-3 years) improve this situation, or would the increased costs outweigh potential benefits?

]]> By: Francine McKenna http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/comment-page-1/#comment-833 Francine McKenna Fri, 09 Nov 2007 20:51:02 +0000 http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/#comment-833 AA was not unlucky to be Enron's auditors. They were there by natural selection . It was natural for them to be selected, grow, and prosper with that client because the aggressive, success-at- any-cost culture was compatible. It didn't hurt that there were enormous egos on both sides and mutual benefits from meeting each others needs. However, that's where all the firms are the same. Even now, doing more business is their sole measure of success rather than serving the clients interests within the context of being an ethical "professional" above all else. AA was not unlucky to be Enron’s auditors. They were there by natural selection . It was natural for them to be selected, grow, and prosper with that client because the aggressive, success-at- any-cost culture was compatible. It didn’t hurt that there were enormous egos on both sides and mutual benefits from meeting each others needs. However, that’s where all the firms are the same. Even now, doing more business is their sole measure of success rather than serving the clients interests within the context of being an ethical “professional” above all else.

]]> By: Edmund http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/comment-page-1/#comment-823 Edmund Thu, 08 Nov 2007 20:18:08 +0000 http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/#comment-823 As I recall, it wasn't the "fee f*ck" issue specifically that caused AA's problems with Enron (and thus the end of AA). But a firm with a problem like this is likely out of control. I think the author was trying to make the point that if it had not been the Enron affair that lead to AA's downfall, it would have been something else. This is in contrast to another theory that AA was simply unlucky to be Enron's auditor - i.e. it could have happened to any other of remaining Big 4 firms. As I recall, it wasn’t the “fee f*ck” issue specifically that caused AA’s problems with Enron (and thus the end of AA). But a firm with a problem like this is likely out of control. I think the author was trying to make the point that if it had not been the Enron affair that lead to AA’s downfall, it would have been something else. This is in contrast to another theory that AA was simply unlucky to be Enron’s auditor – i.e. it could have happened to any other of remaining Big 4 firms.

]]> By: Neil http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/comment-page-1/#comment-817 Neil Thu, 08 Nov 2007 04:53:50 +0000 http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/#comment-817 That sounds like a good book. But did the infighting lead to the Enron debacle or just cause friction? That sounds like a good book. But did the infighting lead to the Enron debacle or just cause friction?

]]> By: Edmund http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/comment-page-1/#comment-811 Edmund Wed, 07 Nov 2007 16:43:01 +0000 http://neilmcintyre.ca/traditional-partnership-model-being-tossed-aside/#comment-811 Reading this article reminded me of a book "Final Accounting" http://www.amazon.com/Final-Accounting-Ambition-Arthur-Andersen/dp/0767913825 The book is about the final days of Arthur Anderson. The author, who worked at AA, talks about some of the dysfunctional practices she saw and how they lead to AA's downfall. One of the practices is called the "fee f*ck". This involved playing internal politics to get credit for a new client and the billings they brought in. There were a lot of ugly and wasteful internecine struggles whenever the person who got the client worked in a different office than the staff who actually worked on the engagement. Anyway, the lesson of this is you need to be careful how the eat-what-you-kill compensation model is structured. You need to ensure that it is reasonably fair to the rainmaker as well as the staff who actually serve the client. I think a firm also need some sort of quick and efficient dispute-resolution mechanism to prevent squabbles over fees. Reading this article reminded me of a book “Final Accounting”

http://www.amazon.com/Final-Accounting-Ambition-Arthur-Andersen/dp/0767913825

The book is about the final days of Arthur Anderson. The author, who worked at AA, talks about some of the dysfunctional practices she saw and how they lead to AA’s downfall. One of the practices is called the “fee f*ck”. This involved playing internal politics to get credit for a new client and the billings they brought in. There were a lot of ugly and wasteful internecine struggles whenever the person who got the client worked in a different office than the staff who actually worked on the engagement.

Anyway, the lesson of this is you need to be careful how the eat-what-you-kill compensation model is structured. You need to ensure that it is reasonably fair to the rainmaker as well as the staff who actually serve the client. I think a firm also need some sort of quick and efficient dispute-resolution mechanism to prevent squabbles over fees.

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