Amazing Facts About The Big 4

The Big 5 (Sorry 4) accounting firms have been on the top of every finance professional's mind for some reason or the other. There are a couple of true but amazing facts about them, not known to many. Known as the Big 4 accounting firms they are:

(Arthur Anderson which made it the Big 5 is now in archives).

Of course they set the global standards for transparency in business. But who is their owner? Shhhhh ... It is a well-guarded secret. Even though present in over 120 countries, for obvious reasons each one of them is headquartered in a tax haven. If you enquire any details about these firms in a tax haven like Panama, you may end up spending the next 2 years in jail. Understand how secret the ownership is!

They have paid billions of dollars as fines in the U.S alone to the SEC. In U.K they are being subject to investigations under the Fair Trade Practices Act. They are the subject of cartoons in the western press and lampooned by the media.

They have been found innovative in:

• Booking bogus sales
• Capitalizing revenue expenses
• Insider trading & related unethical practices
• Not accounting sales returns
• Inadequate disclosure of off-balance sheet items
• Assisting the management in asset stripping
• Failing to record liabilities or suppress liabilities

Well the list on their accounting "innovation" could go on ... That is if you do not reckon shredding of documents as an expert service. It is these 'credible' professional outfits that are in India, advising the Government of India on:

• Speed and directions of reforms
• Advisor to the planning commission
• Providing expertise to the disinvestment process
• Privatization and Globalization
• Policies for inviting FDI

So if you want to innovate your accounts hire these "experts", they would do a good job for you and of course make a fortune in the bargain. If you are corporate manager, you may have personally felt bombarded, sullied, trampled over, bullied and even decried at your own office by representatives of the Big 4. Simply because they are from the Big 4. Remember, they charge you and you pay even for the time spent on abusing you!

If you are a decision maker you might have noticed subtle hints to influence your decisions. Hiring the kith and kin of the decision makers is one of their tried and trusted methods. They are experts in the art of making friends and influencing people. They are too good at Dollar Diplomacy!

Their ownership is unknown, their competency is suspect and their advice bogus. Then, why do the financial institutions, banks and the corporates in India keep them as auditors, advisors or consultants? Why are they allowed to operate in India, and hired and respected by the Government of India? WHY?

Simply because we are not aware of these firms and therefore we are silent. The need of the hour is to create public awareness.

Posted By: Anirban Dutta

With The Fall In Oil Prices, The Gulf Economies Now Appear Vulnerable

According to few oil analysts the Gulf countries are not immune to the overall problems in financial system. If they get below $60 a barrel, some of these countries will suffer. This is evident to an extent when the benchmark indexes in Qatar and Oman fell more than 8 percent Sunday. Kuwait stocks fell 4.4 percent and Saudi Arabia's main index, which fell 8.7 percent Saturday, fell an additional 1.7 percent Sunday.

Stocks in the Gulf region are off about 40 percent so far this year, in line with the decline in the Standard & Poor's 500-stock index on Wall Street and the 45 percent decline in the Dow Jones Euro Stoxx 600 index.

On Saturday, finance ministers from the Gulf Cooperation Council and central bankers met in Riyadh, the Saudi capital, to discuss a more coordinated response to the crisis. In their communiqué, officials "underlined their confidence in the stability of the monetary system in their countries," and said their economies should continue to grow.

But they also expressed concern that the downturn in the world economy would hit home. "We should all work to avoid the negative effects and reduce their impact on our economies by coordinating policies and measures," the Saudi finance minister, Ibrahim al-Assaf, told the Saudi Press Agency. In addition to Saudi Arabia, the Gulf Cooperation Council includes Bahrain, Qatar, Kuwait, Oman and United Arab Emirates.

Globally, banks have posted losses and write-downs totaling $681 billion since the start of the credit crisis, according to Bloomberg News. But so far the damage has been limited in the Middle East. Any big ratcheting up of losses in the region could require governments to bail out their own lenders and dash hopes that sovereign wealth funds from the region would be able to help rescue troubled institutions in the West. Gulf Bank's chief executive, Louis Myers, said the loss would have "no major effects on the soundness of the bank's financial position, and will not affect its ability to continue business."

KPMG International, the accounting firm, warned last week that financial fraud in the region could run into the billions of dollars a year. Colin Lobo, a KPMG partner said the financial crisis was creating an environment "where the risk of fraud will increase as businesses come under pressure to show results. Likewise, individuals will also be tempted where costs are rising and income levels are flat."

Posted By: Anirban Dutta