Sign Of 4

Introduction

The "Big Four" accounting companies - Deloitte, EY, KPMG & PwC - must be some of the humblest multinational corporations in the world. In reality, they are the one constant in all multi-national, multi-billion-dollar deals struck anywhere on the planet. They are so important in any transaction that involves money, that EY was actually found to be discretely funding some international counter-terrorism operations a year or two ago! Talk about influential...but modest. Just one illustration of the importance of these firms is the fact that, according to the World Bank, Pakistan's GDP for 2014 was US$246.9 billion...& the combined annual revenue for the Big Four for 2014 was approximately US$122 billion, that is, almost 50% of this nation's total annual earnings!

With these figures in mind, the obvious conclusion would be that the Big Four would make excellent investment destinations. They are the ultimate inelastic good - the one party that must be a part of every juicy deal made anywhere. Therefore, the logical next step would be a quick overview of what & who the Big Four are.

Deloitte

Deloitte Touche Tohmatsu Limited opened for business in London, England 170 years ago. Today, it produces an annual revenue of US$34.2 billion & employs 210,400 people worldwide (2014 figures). It provides professional services in the fields of auditing, consultation, enterprise risk management, financial advice, legal counsel & taxation.

Deloitte has recently become a victim of a scandal involving inaccuracies in its analysis & audit of Tianhe Chemicals. Details are rather sketchy, therefore nobody is clear as to what exactly went wrong. But considering that Tianhe is a chemical manufacturer, none of the possible explanations can be good for Deloitte's pristine & respectable company image. Especially since Deloitte has faced a slew of scandals during the last couple of years, including but not limited to, using Mauritius in a tax evasion scheme, driving Guangdong Kelon Electrical Holdings into the ground & publishing an inaccurate & unreliable report on the illicit tobacco trade in Australia.

EY

Ernst & Young officially came about through a series of mergers of companies going back to 19th Century England. But EY as we know it today was created through a merger between Ernst & Whinney, & Arthur Young & Co. in 1989. It employs 212,000 globally & made an annual revenue of US$28.7 billion (2015 figures). It specializes in assurance, consultation, financial advice, legal counsel & taxation.

EY has spent the last twenty years creating a disturbing trend of finding itself embroiled in the oddest & most embarrassing of scandals, the one about the counter-terrorism operation "investment" just being one example; others are the scams pertaining to Informix Corporation (1996), Sybase (1997), Cendant (1998), One.Tel (2001), AOL (2002), HealthSouth Corporation (2003), Chiquita Brands International (2004), Equitable Life (2004), Bally Total Fitness (2008), Akai Holdings (2009), Anglo Irish Bank (2009), Sons Of Gwalia (2009), Lehman Brothers (2010), Moulin Global Eyecare (2010), Sino-Forest Corporation (2011), Olympus Corporation (2011), Standard Water (2013), Hellas Telecommunications (2015) & the Namibian forensic investigations (2015).

KPMG

KPMG got its start in 1870, when William Barclay Peat joined a London accounting firm & then took it over in 1891. Since then, KPMG has made leaps & bounds until now when it makes an annual revenue of US$26.5 billion (2015 figure) & maintains a global employee base of 162,000 (2014 figure). It supplies support in the fields of assurance, consultation, financial & actuarial advice, legal counsel & taxation.

Recently, an unsettling Internet story has rocked the financial world with the disclosure that the Canadian Government is investigating a possible tax evasion scheme in which KPMG allegedly advised wealthy Canadian clientèle to place their money in corporations on the Isle Of Man to avoid paying taxes. KPMG stakeholders are wringing their hands with worry because if the allegations prove true, the aftermath will open up the entire can of worms, including the scandals that KPMG has managed to put behind it, such as Rite Aid (2003), Oxford Health Plans Inc. (2003), Lernout & Hauspie (2004), United States Department Of Justice (2005), Fannie Mae (2006), Siemens (2007), Xerox (2008), Tremont Group (2008), HQ Bank (2010), Hewlett Packard (2011) & Olympus (2011).

PwC

PricewaterhouseCoopers started life in 1854 when William Cooper founded an accountancy practice in London, which became Cooper Brothers seven years later when his three brothers joined. Since then it has gone on to become a household name with an annual revenue of US$34 billion & a worldwide workforce of 195,400 (2014 figures). It focuses on assurance, consultation, financial & actuarial advice, legal counsel & taxation.

PwC's 2015 Media Industry Report has been met with scepticism on account of the rumors of inaccuracy that surround its 2014 Report. PwC is currently engaged in trying to explain its research methodology. It is every PwC stakeholder's sincere hope that the explanation is effective because if it isn't, there is the danger that PwC's past missteps may start to be viewed as part of a pattern, e.g. AIG (2005), Tyco International (2007), Northern Rock (2007), Yukos (2010), JP Morgan Securities (2012) & the Luxembourg Leaks (2014).

Conclusion

The lesson learnt is that be it bulls, bears or stags, there is really no such thing as a "safe investment". In addition, the idea of a "safe region" is also technically a myth, not because there is no such thing as violence, but because focusing on political boundaries is likely to be less enlightening than focusing on the state of the companies that transact business within those boundaries.