> The misconduct mostly involved junior assurance staff, who shared online documents containing answers to internal assessments, it said.
This is some major BS right here. "The rogue engineer", "the junior staff", etc. I've seen it more times than I can count, this was organized by management because with all those certifications junior staff can be sold as experienced. I've seen such "juniors" not being able to understand even the language used in a meeting despite ostensibly being the most qualified people in the room.
Audit is the area in which this happens most of the time because it's where all the legitimacy and plausible deniability come from. And I know all major EU institutions tried this at least once in their existence: put junior auditor staff with creatively obtained certifications on what were supposed to be senior positions then when some bubble burst in the media everything was spun with the same wording as above. Just some misconduct of junior staff with no knowledge or involvement of senior management (I'd wager that as we speak ~80% of auditing staff in all EU institutions is junior or inexperienced staff).
In reality this happens either to extract more money for low value individuals or to provide ass covering for senior management, boards, presidents, and CEOs, by giving them the possibility to say their best intentions and actions were derailed by a rookie mistake from an inexperienced employee.
> I'd wager that as we speak ~80% of auditing staff in all EU institutions is junior or inexperienced staff
Given that the public service sector tends to pay shit, I'd tend to agree with you - and that worldwide, not just the EU. Not really surprising that any kind of major government-run project ends up in some form of clusterfuck - be it nuclear plants, major IT overhauls, construction of new roads or railroads, construction in general... wherever the erosion of the tax base following the rise of neo-liberalism hit, in-house expert staff able to exercise oversight of projects was the first to be let go and replaced by externally hired staff.
Where I live PwC is mostly a bodyshop that employs a disproportionate amount of fresh graduates and junior engineers.
Their business model is to hire those people and claim they are way more experienced than they are. Afterward, they lease them to some client for 6-12 months.
I find their business model incredibly annoying, but the thing that actually worries me is that many of those clients are public agencies, regional governments, etc.
Virtually all citizens are forced to consume the crap built by PwC and their competitors.
the further abhorrent practice is also of hiring immigrants who have the need for h1bs straight out of college, giving them disproportionately worse #hours, and having stringent artificial processes and timelines that delays their visa processing to the green card stage - all of which is still guaranteed employee retention due to the need of the immigrant employee per US laws to stay unemployed in the US for no longer than 60 days, else face deportation. it's modern day exploitation, if not servitude.
Most "consulting companies" are like that too. They bring in the great team to win you over, and then when they secured the contract, they replace them with the cheap team.
That's traditional at the Big 6 (now 4, or whatever it is now). Andersen Consulting (now Accenture) bought an entire former college campus and prides itself on churning new hires who majored in almost anything (many liberal-arts majors like English or what have you) through a six-week programming course there, and then putting them on jobs. I went through it.
I walked past one such hire on the job afterward, and noticed that the code on her screen made a line from the upper left to the lower right corner. Closer inspection revealed that she had written 32 nested statements to iterate through the 32 characters in a part number (used by our clients for military equipment).
After leaving 5 years later, I went to PWC (then just Price Waterhouse). They did not have their shit together nearly as well as Andersen, let me tell you. So... that's kinda scary.
A comment about junior staff:
This is not part of some sinister scheme but indeed the number of juniors is quite pronounced because the low level work involves a lot of small work off someone else's prior work. You dont need any technical knowledge to do it. We are talking about check the signature is there, the number in the excel agrees with the pdf etc. Im sure it can be time consuming but it needs to be done.
Naturally , there are poeple setting the guidance on the work itself i.e. which signature should be found, and where you should document it. But those jobs are very limited.
Thats why their project teams are so tilted towards juniors. Simply put, most of the work available is grunt work. A construction job needs 1 architect, 1 engineer, and many laborers. Its not very different here.
There is a mixed bag of talent in those ranks.
There is nothing wrong with staffing projects accordingly. The blame on juniors, when it hapoens, is a escapism which should be easily disarmed by anyone knowing what they are doing.
This hierarchy is true for most audit firms. This may not apply to the consulting arms.
The product sold is not a miracle drug. People understand those with talent are setting the steps to be performed and are the sleuths with the hound nose for fraud. Clients are paying paying for that talent and the experience.
It's very different here. On paper those certifications junior auditors get make the difference between "guy with hammer" and "engineer". These juniors are sent in as capable auditors as soon as they get those certifications pinned to their chests. At best they have a lead auditor checking up some of their work.
Very few builders intend to use "guy with hammer" as an architect or engineer with the purpose of introducing flaws in the result. While in audit it happens in so many cases because the audit report more often than not is intended to miss on several findings under the cover of "junior mistake" if ever caught.
> People understand those with talent are setting the steps to be performed and are the sleuths with the hound nose for fraud. Clients are paying paying for that talent and the experience.
This is too generous. The talent and experience didn’t prevent 1,100 of their own people from cheating. They didn’t prevent Enron, Bernie Madoff.
“The guy with hammer” eventually gets promoted to Manager or Partner and then continues to see everything as a nail. But the hammer in this case is bunch of checkboxes.
It’s incredible to see in my organization that Internal Audit now has some responsibility reviewing corporate internet security. Auditors running around with CISSP certificates. The result is a bunch of checkboxes.
The auditor report on financial statements is now just a required check box without meaning. The hound noses for fraud are now the active investors, which try to untangle the obfuscated financial statements. When was the last time you saw anyone use Net Income as a indicator. Everyone tries to undo the accounting adjustments and look at EBITDA.
> We are talking about check the signature is there, the number in the excel agrees with the pdf etc. Im sure it can be time consuming but it needs to be done.
No, it not needs to be done. This kind of job is literally what was defined as a "bullshit job" - any decent computer-first designed workflow would not need a human be involved for such crap at all.
The problem is that minimum wages are too low, so companies don't have an incentive to spend money on introducing efficient, fully IT-centered processes... after all, why spend millions of dollars on a risky IT project when you can hire people for that?
If anyone is interested to read more on this, read the enforcement action reports from the relevant national regulators: Canadian Public Accountability Board [0] and the US Public Company Accounting Oversight Board (PCAOB) [1]
These were internal training that could be used to satisfy professional accounting designation's annual Continuing Professional Education (CPE) requirements to renew your profesional membership (so you could continue using your chartered accountancy / CPA letters after your name).
"The Firm has designed its training program to serve multiple purposes, including to provide Firm personnel with technical instruction, to further their professional development, and to satisfy some of the continuing professional education requirements imposed by the accountancy boards that grant CPA certifications to the Firm’s auditors."
It was not just the juniors. Even partners are involved:
"Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm."
I am surprised that this was self-reported, and I applaud them for that.
I strongly suspect that it was only self-reported because someone who used to work for the firm was now at the regulatory body and gave an old buddy a heads-up.
Is anybody who has dealt with PwC in any way surprised by this? In my experience it is a company with an entirely poisonous culture that moves from project to project over promising, under delivering and scarpering at the earliest opportunity usually leaving someone else to blame.
The point of an auditor is to provide accountability, a person who can say "I took an honest look at these financial docs and they are a reasonable picture of this business". The person needs to be believable, so someone qualified who understands the technical points, but also someone who would raise the red flags if they existed.
You can have that authority while being unable to answer silly exam questions, and you can lack it while scoring perfectly.
What we don't want is a society where we think people are competent and disinterested based on how well they did on some test. That leads to people cramming for tests, cheating, and avoidance of difficult choices.
I'm an ex Big4 auditor and you're right. I know HN likes to bash these kinds of companies but they're full of highly competent people that are managed by idiots. These tests are bullshit internal things, think "Phishing awareness" with some stupid 20 question quiz on if you should open an email attachement or not.
They're also working absolutely insane hours, especially during "busy season", and are expected to complete the training in their spare time or time off. It's usually tied to your bonus too, if you haven't done the yearly training you've worked for nothing. Anyone in their shoes would have looked for the answers to save 40 hours of bullshit training on top of an 80-100 hour work week.
> someone who would raise the red flags if they existed
The reason this is so scandalous is that a company whose differentiator is its integrity just demonstrated a gaping hole in that area. There is a conflict of interest in every audit that is sponsored by the organization being audited. How are we now supposed to believe the results of PwC audits that are favorable to the hand that has been feeding them when they've showed a willingness to compromise their principles for their own short term benefit.
> The point of an auditor is to provide accountability
I always thought that the point was to be able to say "see, someone signed here and said everything was fine!" for a fee. You shop around until someone is able to provide that signature for a reasonable amount.
yeah. currently involved in a decade+ struggle to get my auditor certificate. it is hard. the exam is "simple" in the sense you have to regurgitate answers from an answer bank and that is it but i am simply not capable of crossing that exam barrier.
outside the exam? well i do work with people who have actually qualified their exams and its not like they have any more horns on their heads than i do. the people i work with specifically, their understanding is limited to how they could cram the exam. that's it.
i don't know how that makes me feel. salty? probably. i have given a lot to this endeavour without an end in sight. by law that makes me unfit to be an auditor, oh well, exams count. funny how you become a professional "after" you finish theoretical exams like an auditor and if you do it by any means necessary, you are told you are a professional now.
I compete with 'the big four' on a small slice of their activities and have seen some of their work product. It is incredible to me that they manage to sell it, but they do and at exorbitant prices. The strength of those brands is quite amazing.
I wonder how any of the big four are still in business, they've been caught in so many scandals so many times it's mind boggling. It's time they went the way of Arthur Andersen.
What's even more shocking is that large companies, banks, healthcare providers, and government institutions continue to pay companies like the Big 4 or IBM to do consulting work when the outcome is always like this. Crap.
Either the sales teams in these companies must be on another level or the price is just unimaginably cheap.
It's absolutely baffling that after so many scandals, sometimes with consequences so severe that the whole global economy was destabilized(subprime crisis), we still have not found a better way to do audits than to use the same corrupt cartel.
All of the Big 4 work this way. They're legally organised as "networks" to which the name is licensed to independent legal entities in each country or jurisdiction by a small headquarters entity. However while this legal fiction helps them in the court room, the facts on the ground seem otherwise, a senior executive in Berlin will find that "miraculously" the completely different legal entity in Singapore has a job opening that exactly matches their CV when they want to work in Singapore for a few years.
It is reasonable to assume that most of the problems with the audit firms are endemic both within a network and likely across the networks. What they're doing is very close to useless, they're not very good at it, and yet they reap enormous fortunes from doing so.
Governments are now scared to do anything about it - even just digging into some of the obvious problems, because "Scandal at audit firm" is how we ended up with a Big 4 instead of a Big 5. Arthur Anderson was destroyed by what was uncovered when Enron blew up.
I believe the right fix should be inspired by the Paris MOU, the mechanism by which European ports instituted Port State Control as opposed to Flag State Control.
Under the Paris MOU, Flag States remain responsible in principle for proper oversight over the ships flying their flag. But the European ports inspect some of them to see if that oversight has been effective, and if they're non-conforming they are detained until the problem is rectified.
The inspections result in data, and the data is analysed and then - this is the clever bit - that analysis informs future inspections. If the inspections of vessels flying flag A mostly came up with nothing, flag A gets whitelisted and next cycle few inspections occur for flag A. On the other hand if the inspections for flag B keep finding problems, flag B gets blacklisted and next cycle more inspections occur for flag B. This is repeated forever.
For a ship owner, inspections are annoying and cost money but on the other hand some registers, especially "Open Registers" (aka "Flags of convenience") may be cheaper (and their lax standards might let you avoid doing maintenance other registers would have required). The Paris MOU's rules mean that if you pick a notoriously bad flag because it was cheaper or easier for you, you're going to spend a lot of time sat in port not making any money, either detained or being inspected. So, even if you choose a cheap flag you'll look for one that isn't blacklisted. This has the effect of raising standards without costing lots of money for the Paris MOU's members to inspect everything constantly.
I think countries should hire their own relatively smaller team of auditors, and re-audit some of the companies that get audited, and then not only act on the result of the re-audit (e.g. fining or winding up businesses where the government's auditors found problems, fining audit firms that missed obvious problems) but also analysing the results of the audits to put audit firms (including but not limited to the Big Four) into white/ black lists and re-audit more or less of their future work accordingly. The incentive becomes: Pick an audit firm (Big Four or otherwise) that is whitelisted, so that you're less likely to get re-audited.
[+] [-] buran77|4 years ago|reply
This is some major BS right here. "The rogue engineer", "the junior staff", etc. I've seen it more times than I can count, this was organized by management because with all those certifications junior staff can be sold as experienced. I've seen such "juniors" not being able to understand even the language used in a meeting despite ostensibly being the most qualified people in the room.
Audit is the area in which this happens most of the time because it's where all the legitimacy and plausible deniability come from. And I know all major EU institutions tried this at least once in their existence: put junior auditor staff with creatively obtained certifications on what were supposed to be senior positions then when some bubble burst in the media everything was spun with the same wording as above. Just some misconduct of junior staff with no knowledge or involvement of senior management (I'd wager that as we speak ~80% of auditing staff in all EU institutions is junior or inexperienced staff).
In reality this happens either to extract more money for low value individuals or to provide ass covering for senior management, boards, presidents, and CEOs, by giving them the possibility to say their best intentions and actions were derailed by a rookie mistake from an inexperienced employee.
[+] [-] rmbyrro|4 years ago|reply
And launch a PwCoin ICO.
To the dedicated anti-crypto downvoters out there: will you consider appreciating the sarcasm, please?
[+] [-] mschuster91|4 years ago|reply
Given that the public service sector tends to pay shit, I'd tend to agree with you - and that worldwide, not just the EU. Not really surprising that any kind of major government-run project ends up in some form of clusterfuck - be it nuclear plants, major IT overhauls, construction of new roads or railroads, construction in general... wherever the erosion of the tax base following the rise of neo-liberalism hit, in-house expert staff able to exercise oversight of projects was the first to be let go and replaced by externally hired staff.
[+] [-] vba616|4 years ago|reply
You're right, but it's a shame to guess when the PCAOB release made it ultra-clear:
"Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm"
[+] [-] mkl95|4 years ago|reply
Their business model is to hire those people and claim they are way more experienced than they are. Afterward, they lease them to some client for 6-12 months.
I find their business model incredibly annoying, but the thing that actually worries me is that many of those clients are public agencies, regional governments, etc.
Virtually all citizens are forced to consume the crap built by PwC and their competitors.
[+] [-] hackernewds|4 years ago|reply
[+] [-] isbvhodnvemrwvn|4 years ago|reply
[+] [-] HNHatesUsers|4 years ago|reply
I walked past one such hire on the job afterward, and noticed that the code on her screen made a line from the upper left to the lower right corner. Closer inspection revealed that she had written 32 nested statements to iterate through the 32 characters in a part number (used by our clients for military equipment).
After leaving 5 years later, I went to PWC (then just Price Waterhouse). They did not have their shit together nearly as well as Andersen, let me tell you. So... that's kinda scary.
[+] [-] IG_Semmelweiss|4 years ago|reply
Naturally , there are poeple setting the guidance on the work itself i.e. which signature should be found, and where you should document it. But those jobs are very limited.
Thats why their project teams are so tilted towards juniors. Simply put, most of the work available is grunt work. A construction job needs 1 architect, 1 engineer, and many laborers. Its not very different here. There is a mixed bag of talent in those ranks.
There is nothing wrong with staffing projects accordingly. The blame on juniors, when it hapoens, is a escapism which should be easily disarmed by anyone knowing what they are doing.
This hierarchy is true for most audit firms. This may not apply to the consulting arms.
The product sold is not a miracle drug. People understand those with talent are setting the steps to be performed and are the sleuths with the hound nose for fraud. Clients are paying paying for that talent and the experience.
[+] [-] buran77|4 years ago|reply
It's very different here. On paper those certifications junior auditors get make the difference between "guy with hammer" and "engineer". These juniors are sent in as capable auditors as soon as they get those certifications pinned to their chests. At best they have a lead auditor checking up some of their work.
Very few builders intend to use "guy with hammer" as an architect or engineer with the purpose of introducing flaws in the result. While in audit it happens in so many cases because the audit report more often than not is intended to miss on several findings under the cover of "junior mistake" if ever caught.
[+] [-] appleiigs|4 years ago|reply
This is too generous. The talent and experience didn’t prevent 1,100 of their own people from cheating. They didn’t prevent Enron, Bernie Madoff.
“The guy with hammer” eventually gets promoted to Manager or Partner and then continues to see everything as a nail. But the hammer in this case is bunch of checkboxes.
It’s incredible to see in my organization that Internal Audit now has some responsibility reviewing corporate internet security. Auditors running around with CISSP certificates. The result is a bunch of checkboxes.
The auditor report on financial statements is now just a required check box without meaning. The hound noses for fraud are now the active investors, which try to untangle the obfuscated financial statements. When was the last time you saw anyone use Net Income as a indicator. Everyone tries to undo the accounting adjustments and look at EBITDA.
[+] [-] mschuster91|4 years ago|reply
No, it not needs to be done. This kind of job is literally what was defined as a "bullshit job" - any decent computer-first designed workflow would not need a human be involved for such crap at all.
The problem is that minimum wages are too low, so companies don't have an incentive to spend money on introducing efficient, fully IT-centered processes... after all, why spend millions of dollars on a risky IT project when you can hire people for that?
[+] [-] knight17|4 years ago|reply
These were internal training that could be used to satisfy professional accounting designation's annual Continuing Professional Education (CPE) requirements to renew your profesional membership (so you could continue using your chartered accountancy / CPA letters after your name).
"The Firm has designed its training program to serve multiple purposes, including to provide Firm personnel with technical instruction, to further their professional development, and to satisfy some of the continuing professional education requirements imposed by the accountancy boards that grant CPA certifications to the Firm’s auditors."
It was not just the juniors. Even partners are involved:
"Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm."
I am surprised that this was self-reported, and I applaud them for that.
[0]: https://cpab-ccrc.ca/docs/default-source/enforcement/2022-en...
[1]: https://pcaob-assets.azureedge.net/pcaob-dev/docs/default-so...
[+] [-] FireBeyond|4 years ago|reply
[+] [-] ratherbefuddled|4 years ago|reply
[+] [-] ushakov|4 years ago|reply
[+] [-] belter|4 years ago|reply
[+] [-] lordnacho|4 years ago|reply
You can have that authority while being unable to answer silly exam questions, and you can lack it while scoring perfectly.
What we don't want is a society where we think people are competent and disinterested based on how well they did on some test. That leads to people cramming for tests, cheating, and avoidance of difficult choices.
[+] [-] Cazafr|4 years ago|reply
They're also working absolutely insane hours, especially during "busy season", and are expected to complete the training in their spare time or time off. It's usually tied to your bonus too, if you haven't done the yearly training you've worked for nothing. Anyone in their shoes would have looked for the answers to save 40 hours of bullshit training on top of an 80-100 hour work week.
[+] [-] darkerside|4 years ago|reply
The reason this is so scandalous is that a company whose differentiator is its integrity just demonstrated a gaping hole in that area. There is a conflict of interest in every audit that is sponsored by the organization being audited. How are we now supposed to believe the results of PwC audits that are favorable to the hand that has been feeding them when they've showed a willingness to compromise their principles for their own short term benefit.
[+] [-] rinze|4 years ago|reply
I always thought that the point was to be able to say "see, someone signed here and said everything was fine!" for a fee. You shop around until someone is able to provide that signature for a reasonable amount.
[+] [-] 2Gkashmiri|4 years ago|reply
i don't know how that makes me feel. salty? probably. i have given a lot to this endeavour without an end in sight. by law that makes me unfit to be an auditor, oh well, exams count. funny how you become a professional "after" you finish theoretical exams like an auditor and if you do it by any means necessary, you are told you are a professional now.
i am ranting at this point now. sorry
[+] [-] jacquesm|4 years ago|reply
[+] [-] sofixa|4 years ago|reply
[+] [-] brtkdotse|4 years ago|reply
[+] [-] RcouF1uZ4gsC|4 years ago|reply
[+] [-] Havoc|4 years ago|reply
[+] [-] sofixa|4 years ago|reply
[+] [-] spicyusername|4 years ago|reply
Either the sales teams in these companies must be on another level or the price is just unimaginably cheap.
[+] [-] ushakov|4 years ago|reply
they have connections and clearances other companies can't access
[+] [-] IG_Semmelweiss|4 years ago|reply
[+] [-] spupe|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] kderbyma|4 years ago|reply
[+] [-] thoughtstheseus|4 years ago|reply
[+] [-] tialaramex|4 years ago|reply
It is reasonable to assume that most of the problems with the audit firms are endemic both within a network and likely across the networks. What they're doing is very close to useless, they're not very good at it, and yet they reap enormous fortunes from doing so.
Governments are now scared to do anything about it - even just digging into some of the obvious problems, because "Scandal at audit firm" is how we ended up with a Big 4 instead of a Big 5. Arthur Anderson was destroyed by what was uncovered when Enron blew up.
I believe the right fix should be inspired by the Paris MOU, the mechanism by which European ports instituted Port State Control as opposed to Flag State Control.
Under the Paris MOU, Flag States remain responsible in principle for proper oversight over the ships flying their flag. But the European ports inspect some of them to see if that oversight has been effective, and if they're non-conforming they are detained until the problem is rectified.
The inspections result in data, and the data is analysed and then - this is the clever bit - that analysis informs future inspections. If the inspections of vessels flying flag A mostly came up with nothing, flag A gets whitelisted and next cycle few inspections occur for flag A. On the other hand if the inspections for flag B keep finding problems, flag B gets blacklisted and next cycle more inspections occur for flag B. This is repeated forever.
https://www.parismou.org/detentions-banning/white-grey-and-b...
For a ship owner, inspections are annoying and cost money but on the other hand some registers, especially "Open Registers" (aka "Flags of convenience") may be cheaper (and their lax standards might let you avoid doing maintenance other registers would have required). The Paris MOU's rules mean that if you pick a notoriously bad flag because it was cheaper or easier for you, you're going to spend a lot of time sat in port not making any money, either detained or being inspected. So, even if you choose a cheap flag you'll look for one that isn't blacklisted. This has the effect of raising standards without costing lots of money for the Paris MOU's members to inspect everything constantly.
I think countries should hire their own relatively smaller team of auditors, and re-audit some of the companies that get audited, and then not only act on the result of the re-audit (e.g. fining or winding up businesses where the government's auditors found problems, fining audit firms that missed obvious problems) but also analysing the results of the audits to put audit firms (including but not limited to the Big Four) into white/ black lists and re-audit more or less of their future work accordingly. The incentive becomes: Pick an audit firm (Big Four or otherwise) that is whitelisted, so that you're less likely to get re-audited.
[+] [-] belter|4 years ago|reply
[+] [-] poppafuze|4 years ago|reply
[deleted]
[+] [-] HNHatesUsers|4 years ago|reply
[deleted]