Epilogue: A brazen disregard for public duty
There was more to the story, and a lot to learn, from an enforcement action against EY nearly 20 years ago to the day
“I find the public passion for justice quite boring and artificial for neither life nor nature cares if justice is ever done or not.” Novelist Patricia Highsmith
After posting the PwC-Alteryx story yesterday, I realized two things:
1) I had a bad link in my clip from my legacy blog re: The Auditors. I have fixed that link related to EY.
2) I had forgotten to include an interesting related anecdote from my time at PwC in 2005-2006 that directly relates to this case. It shows that PwC had policies to address "complex" independence issues and knows how to do things right.
First, a discussion of what was under that bad, now good, link.
In my clip from re: The Auditors I mention that EY had suffered through a serious set of enforcement actions in the early 2000’s related to its mishandling of several business alliance related issues.
One area that requires greater scrutiny by all of the Firms’ internal audit and compliance functions is business alliances. This issue is a landmine for any of the audit firms. E&Y lost the privilege of taking on new clients for six months because of their lack of care over who and how they aligned with PeopleSoft, were cited for a foreign affiliate that was too close to BAAN, and lost an important client in American Express related to this issue.
The link leads to a post from 2007 where I write about how EY was recovering nicely from this setback:
Ernst & Young continues to perform well in winning new work and doing so efficiently. E&Y won the most new clients during the 12 months covered, and the firm won almost 50% of the engagements on which it proposed.
On April 16, 2004, almost exactly 20 years ago, the SEC's Chief Administrative Law Judge Brenda P. Murray signed an 82-page, nearly 34,000 word opinion that is a master class in how auditor independence cases, especially business alliance cases, should be analyzed. Judge Murray heard a lot of witnesses, and named all the names at EY and PeopleSoft.
That contrasts dramatically with the 12 pages and 3,300 words from the PCAOB on PwC we read about yesterday, that referenced an unnamed issuer, and anonymous actors at PwC, and that focused on "quality control" over a process that is allowed to deliver only "reasonable assurance" that the rules will be followed.
Judge Murray's 57 footnotes are nearly as long as the whole PCAOB enforcement order!