Week 6-2

The topic that I chose was regarding the Big Four auditors being accountable for their international transactions. In the article specifically, it references when Hewlett-Packard (HP) was purchasing Autonamy, a British software company, and how the merger of the two international companies were causing issues even though Ernst & Young and Deloitte handled the audits respectively, KPMG also provided advice on the deal. What happened essentially was that HP had decreased the value of Autonamy by $8.8 billion due to "accounting improprieties, misrepresentation, and disclosure failure." Deloitte will be on the hook for this if this happens to be true since they represented Autonamy. If this is not true that Ernst & Young would be the one that would have a lot of explaining to do. What makes this auditing process extremely difficult is because even though Deloitte is handling the auditing for Autonamy, the accounting practices in Europe are different from the accounting practices in the United States.An issue that was brought up in the article was that "Deloitte provided $6.7 million in non- auditing services, which would be illegal in the Sarbanes-Oxley Act, but was permitted in Britain." Since under Britain's practice this was an acceptable practice, there is nothing anyone in the United States that would be able to do anything. Aside from the auditing issues in the merger of Hewlett-Packard and Autonamy, "the SEC also charged the Big Four for refusing to share documents related to audits of troubled Chinese firms listed on American exchanges. Chinese divisions of the Big Four have audited several Chinese firms that listed abroad and then tanked." It looks like the Big Four firms are more interested in making money through consulting and auditing those firms instead of being transparent with the SEC. In my opinion, this is an issue since the firm is represented both on the United States side as well as the International side. There needs to be a common goal in resolving these types of issues. Although, it would be tough to have two different countries agree to one accounting principal, the least they can do is provide transparency on what is going on in the company. The best way is to open up the books to the internal and external auditors, give them the opportunity to see what is going on behind the financial statements. If our goal is to continue to help each other grow, transparency is crucial. It does not benefit both sides if companies continue to make it to American exchanges and crash shortly after. In the end, the company, investors, and its employees all lose.