I once had an editor who regularly conferred on his stable of reporters the old adage, “One might be unlucky, but two is a trend.”
That usually proved true when pursuing a story of fraud or corruption in a company or administration, or covering a sports team that seemed only to excel in losing games in the closing seconds.
But those accounting firms whose client base includes a large bloc of public companies would be a most unwelcome proving ground for my former boss’ overused axiom.
I mention this only because of the potentially precedent-setting scenario between Big Four firm Pricewaterhouse-Coopers and Amerco, its former audit client.
It seems that Amerco - parent to the ubiquitous U-Haul truck rental service - is requesting that the Public Company Accounting Oversight Board perform nothing less than a Columbo-like investigation on PwC before it goes through its mandatory process of certifying accounting firms.
As most know by now, Amerco filed suit in April against PwC, charging that the Big Four firm provided the company with “flawed financial advice” and seeking some $2.5 billion in damages.
Amerco said that the suit outlined “a series of events caused by PwC” that resulted in the need for the debt-strapped Amerco to restructure its balance sheet and obtain over $850 million in new financing.
Amerco previously went to settle the dispute through mediation and hired top audit authority and Baruch accounting professor Douglas Carmichael - who is, ironically, now chief auditor at the PCAOB.
PwC, in turn, has labeled the incident an example of Amerco’s pattern of blame-shifting.
Given my unique personal experiences with regard to U-Haul, let’s just say that if there was anything flawed, its roots could probably be traced to their reservation system. Once, I reserved one of their midsized trucks only to find an open trailer with a hitch waiting for me.
But I digress.
Amerco’s plea to the oversight board is the first from a client requesting that the PCAOB delay registration of a firm over accusations of providing suspect advice.
While watchers of the profession opine that the Amerco request will probably not prohibit PwC from continuing its audit practice, the action is either disturbing or refreshing, depending on which side of the audit fence you sit.
It also may initiate a pattern in which disgruntled former clients go straight to the reformers with their list of grievances - whether real or perceived.
The Amerco legal team - authors of the letter to the PCAOB - is obviously attempting to leverage any doubt that the board may have in its legal fight down the road.
“Recent events have demonstrated that some public accounting firms at times have engaged in conduct that is fundamentally at odds with their public responsibilities as certified public accountants,” reads the letter - just the right mix of metaphors and vague generalities.
But two questions arise out of this squabble. One is how the board will react. And two, how many unsatisfied former audit clients will be tempted to follow Amerco’s lead? Rest assured, the profession will closely monitor one of the board’s first big tests.
PwC may be unlucky. But the next firm to have its registration petitioned will signal a trend.
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