PwC chief admits firm is not perfect
I'm not a regular reader of the Czech Business Monthly (though that might now change) but I'm glad I landed on the current issue as it continues a fascinating interview with the global head of PricewaterhouseCoopers, Sam Di Piazza. And in it he reveals just how vulnerable accountancy firms - even those of PwC's colossal size and influence - remain to life-threatening problems of their own making.
In the wide-ranging interview Di Piazza draws a (perhaps unintended) parallel between Andersen's collapse and PwC's problems in Japan last year where the firm's affiliate partner, the ChuoAoyama Audit Corporation, was suspended by the Japanese Financial Services Agency following a questionable audit of cosmetics company Kanebo International.
Andersen's collapse, he tells the magazine, 'came about because a few people made a few bad decisions. That can happen in any company and that is why a company like ours is required to have a huge commitment to quality and integrity. Frankly, we have to admit that if we lose our reputation, we lose our firm. A few people in Andersen seemed to have lost their way and it cost them dearly.'
The parallels are eerie as Di Piazza then acknowledges regret at the behaviour of his former colleagues in Japan and admits PwC itself is not perfect.
'When people do not live by your values, unless you feel you can help them correct their behavior, you ask them to leave. … We feel there’s no client in the world worth our reputation. There is no tolerance for people who act without integrity. Occasionally, in a company as big as ours, you are going to have people that do things that you regret. Then you treat them directly and you make sure the regulator knows that you recognize your first obligation is to do the right thing. I think we have done that very well.
'In PwC we’re not perfect, but I think we have sent the message. In Japan we shut that firm down. We gave up a major amount of businesses, but we did it because we felt that the most important [asset] was our quality in that market to be at the highest level. We feel that we have that today: even if it’s smaller, it’s a better quality.'
You don't need to read too much between the lines to appreciate the severity of the crisis that engulfed PwC last year – and to its credit the firm took strong, decisive action.
It's not alone in surviving a all-too-close brush with the great regulator in the sky. I've talked to senior KPMG partners who acknowledge that had the firm been indicted in 2005 over the sale of fraudulent tax shelters, it would have struggled to retain client trust. Internal memos have confirmed as much. And as Di Piazza says, lose trust and you lose your business.
It's not easy managing firms employing tens of thousands of professionals across the globe when the actions of an individual could do irreparable harm. Yet partners are handsomely rewarded for doing so.
Given the recent experiences of KPMG and PwC you have to ask whether existing codes of conduct and monitoring systems of staff, partners and firms worldwide are good enough?
Unless they are tightened still further a Big Three might be more a matter of when not if.
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