Model cooperation at Cloopen; Big 4 friend Paul Atkins
The Cloopen case is touted as a model for SEC Enforcement cooperation. There's more to it. The horse race is over and libertarian poster boy Paul Atkins wins the SEC Chair derby.
A German officer visited Picasso in his Paris studio during the Second World War. There he saw Guernica and, shocked at the modernist “chaos” of the painting, asked Picasso, “Did you do this?” Picasso calmly replied, “No, you did this!” Slavoj Žižek, Violence: Six Sideways Reflections
I wrote back on November 24 that the Financial Times had reported KPMG's reputation in the U.K. had come a long way in being rehabilitated.
Side dishes: More Super Micro, Rapoport on tax, SEC Enforcement statistics, and Buffett's cash
Too bad the Harris/Walz campaign did not know this literature!
The failure of U.K. outsourcing company Carillion, in particular, had been "a reputational and financial catastrophe," according to the FT, "resulting in a record regulatory fine and contributing to a temporary withdrawal from bidding on government contracts."
Carillion failed in January 2018, resulting in an investigation that found multiple failings in KPMG’s auditing of the company. In addition, KPMG had “misled” the regulators when they came calling.
[KPMG's new leader] was forced to admit that KPMG’s auditors misled the regulators who inspected the quality of their work at Carillion. The firm was fined a record £21mn by the Financial Reporting Council, the UK’s accounting watchdog, for “textbook failures” in its auditing. It was separately fined £14.4mn for deliberately misleading the FRC and also settled a £1.3bn lawsuit brought by Carillion’s liquidators for an undisclosed sum.
The FT report focused on only the reputation of the KPMG U.K. member firm. As such, it missed the forest for the sin of focusing on only one tree.
I made a list in that newsletter edition of many other scandals that had recently plagued KPMG all over the world. Any national or global media outlet that writes about the activities of any of the largest global audit firms in a major market such as England, Australia, the U.S., China, India, or Germany, for example, in a local, nationalistic manner is putting an ostrich head in the sand. They ignore that the Big 4 member firms in economic centers are an inextricable part of a global network that serves multinationals. Thge national firms do not operate in a local vacuum.
The very next day we woke up to the news that one Macy's accountant allegedly hid nearly $150 million of its delivery expenses over a three- year period.
Macy's auditor? KPMG since 1988.
Leftovers: AmTrust and BDO, Macy's and KPMG
A reminder that the subscription cost for The Dig will be going up on January 1, 2025. This is the first time since I began producing paid newsletters that I am raising the price.
After the paywall, I will discuss another KPMG client, Cloopen, this one in China. Cloopen was touted at the Securities Enforcement Forum in November as the poster child for the benefits of cooperation.
I will also talk to you about Paul Atkins, President-elect Trump’s choice for SEC Chairman, and Atkins’ long and supportive relationship with the Big 4 audit firms.