Big Accounting Firms Fleeing Faster From 'Risky' Clients

WASHINGTON -- The Big Four accounting firms are resigning from so-called “risky” clients at a rate that is twice as fast just three years ago, when the Enron debacle first began unfolding, the Compliance Reporter reported Wednesday.

According to statistics from research house auditanalytics.com, resignations this year have accounted for 34 percent of all departures from auditing assignments, compared with 18 percent in 2001.

Joe Cyr, director of marketing and business development for audit analytics, said that while some firms drop clients because they feel they are not financially worth it -- especially with the decline in non-audit work -- “risk is the biggest reason they are resigning.”

“Firms are looking to get rid of companies because they have internal control issues and reportable conditions,” said Cyr, noting that auditors now fear liability exposure, if they become aware of these matters and don’t take the proper action, and that they need to provide a reason for their resignation.

In one example, provided by auditanalytics.com, PricewaterhouseCoopers in October resigned from its auditing assignment of Pegasus Communications Corp. because of “material weaknesses in the application of accounting principle and policies that led to the restatement of the Company’s financial statements.”

-- NYSSCPA.org News Staff

Posted on 12/8/04