The Danish Audit Company Soap Opera Continues... Part II
The local audit operations of EY in Denmark were on the verge of being shattered. The local partners then formed what is interpreted by most as a reciprocal unholy alliance with KPMG's local Danish branch. Did E&Y manage to attract more than what it had lost? Is the price for survival too high? Will the natural balance and the pecking order in the audit field be resorted? Was the merger with the arch enemy the only option? These and other entertaining questions could continue like a broken record because the clients, staff and stakeholders are left in bewilderment for quite a while.
Modern and global auditing is more about values and culture rather than reporting and stocktaking. Have the global audit companies in certain parts of the world, actually understood what Corporate Governance, Integrity, Ethics and Compliance is all about? This is predominantly the key issue that is asked in the media by a long list of companies and CFO’s who are unfortunately caught in the mess, just prior to the yearend closing.
Perceived audit values
The local KPMG/EY group maneuver has created agitations far beyond the stakeholders of the Danish auditing field. The two audit and accounting firms have left their customers at in a dilemma.
It raises a number of questions regarding the global audit network. Who is the employer? Is the system so loosely bonded, that it is only a shell of an international audit group? Is the company type of franchise? In any case what is going on in the Danish audit world seems to be a bit too far from the set of governance, compliance and audit values that clients generally perceive from a global audit group.
The simple global auditing context, where the Big Four (Deloitte, PwC, EY and KPMG) are the first to be chosen by the leading global companies and leave the rest to the second and third tier audit companies is changing and getting as complex in their auditing requirements typically are. Simplicity of the audit framework and companies and complexity of the accounting, compliance and related requirements will not go hand in hand for a while when billions of audit fees
Was it a purchase, merger or a JV?
The bean counter soap opera started when the local Danish EY International, who had going thru the consequences of a series unpleasant decisions, offered to enter a combination of purchase, merge or a JV with the successful Danish pastry KPMG. In any case, the local partners of KPMG and EY decided to combine forces locally. Apparently transparency and accountability codes do not apply to those that have the first line of oversight authority.
One of the largest Danish stock listed companies, A.P. Møller summarises the situation in a nutshell and the CFO said rather diplomatically: It is indeed highly regrettable that one of our trusted accountants has decided to leave the international accounting firm. It triggers a change because they cannot deliver what is promised in the agreement as a sustainable audit solution for AP Moller-Maersk.
Other companies were less diplomatic and openly expressed their grievances due to the breach of the audit agreement. The brewery giant Carlsberg's CFO who stayed with KPMG for their auditing requirements and did not end up with the deserters said that it was not nice and that he would not want to use multiple resources to choose sides.
