Auditors are capitalism's lubricants, who keep the gears of finance capital smoothly a-whirl, allowing investors to move their money in and out of companies without having to go pore over their books and walk through their facilities. Without auditors, the gears of capitalism would grind themselves to dust:
https://pluralistic.net/2021/02/18/ink-stained-wretches/#countless
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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2023/05/09/dingo-babysitter/#maybe-the-dingos-ate-your-nan
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Unfortunately for capitalism, auditing is irredeemably broken. The Big Four auditors (#PWC, #EY, #Deloitte and #KPMG) have merged to monopoly, becoming #TooBigToFail and #TooBigToJail. These four gigantic firms have spun up fantastically lucrative "consulting" divisions that advise companies on how to cheat on their audits and attain incredible (paper) gains.
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The work of these "consultants" is worth far more than the accounting and auditing jobs the companies do, and the weaker the audits are, the more profitable the consulting is:
https://pluralistic.net/2021/06/04/aaronsw/#crooked-ref
This crisis has been a long time brewing. Back in 2001, the accounting/consulting giant #ArthurAndersen was at the center of Enron's fraud, which lit $11B in shareholder capital on fire.
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Enron had been making everyday people angry for years, engineering rolling blackouts and incredible energy-price gouging, but no one cares about working peoples' complaints. By contrast, stealing $11B from rich people was something the authorities couldn't ignore. They gave Andersen the death penalty, trying to teach the surviving accounting firms a lesson about what happens when you fuck with plutes.
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But those other firms learned the wrong lesson: the collapse of Andersen was so disruptive that it soon became clear that the authorities would never take another giant consulting firm down, no matter how egregious its conduct was. They doubled down on crime, and then doubled down again.
It's hard to pick a winner in the Big Four Accounting Firm Corruption Olympics, but KPMG is a strong contender, with a long history of just being monumentally inept and wrong.
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Back when Enron was unspooling, KPMG devoted itself to threatening people who linked to its website "without a license to do so":
https://web.archive.org/web/20020207141547/http://chris.raettig.org/email/jnl00040.html
A couple years later, they declared war on wifi, trying to convince normies that wireless networks were an existential risk to human civilization:
http://news.bbc.co.uk/2/hi/technology/2885339.stm
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But there's not much money in wifi scare stories or licenses to link. KPMG are good dialectical materialists, devoted to money over ideology, and boy did they figure out some wild ways to make money. For one thing, they figured out that they could get more accountants certified by *cheating*...on *ethics exams*:
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KPMG's top managers bribed regulators to give them the answer-sheets for ethics exams. What did they bribe those public employees with? *Jobs at KPMG*:
There's hardly a month that goes by without another KPMG scandal somewhere in the world, with enormous monetary and social fallout.
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Hundreds of people have passed through the revolving door between the Big Four audit firms and their regulator, the Public Company Accounting Oversight Board, which was created to police audit firms and to protect everyone who has a stake in the stock market.
During the lockdowns, #JustinTrudeau's #LiberalParty government outsourced the creation and maintenance of #ArriveCAN (a contact tracing app for people who entered Canada) to a grifter called #GCStrategies, who billed millions for their services. GC Strategies didn't do any work - instead, they paid KPMG $1,000-$1,500 day to hire freelancers to build the app. The app itself was a catastrophic failure.
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That failure didn't just embarrass the government - it also failed to protect Canadians during a once-in-a-century global pandemic. KPMG raked off a 30% commission:
https://pluralistic.net/2023/01/31/mckinsey-and-canada/#comment-dit-beltway-bandits-en-canadien
In the USA, KPMG helped #Microsoft work up a radioactively illegal tax-evasion scheme.
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Microsoft poured the millions it saved by cheating on its taxes into dark-money operations that lobbied to defund the #IRS so that KPMG and Microsoft could cook up even more illegal tax-evasion schemes:
But KPMG doesn't content itself with screwing over everyday people and rotting our democratic institutions - it also engages in the dangerous business of helping billionaires steal from millionaires.
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For years, the company has moved billions in profits to Puerto Rico to avoid taxes. When the IRS pushed it to pay, Microsoft protested that the agency wasn’t being nice. Then it aggressively fought back in court, lobbied Congress and changed the law.
KPMG was the auditor who signed off on the scam oil company #MillerEnergyPartners, a fraud that operated for years thanks to KPMG's rubber-stamp on its crooked books:
https://www.desmog.com/2021/06/03/miller-energy-kpmg-auditors-oil-fraud/
The company was run by serial fraudsters with long rapsheets for stealing millions. They staffed their C-suite with executives from disgraced companies that had been busted for running #PonziSchemes, issuing press releases praising those execs' "proven track records in raising capital."
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Major accounting firm KPMG is under fire from investors who filed a class action lawsuit against the firm for overstating the asset values of now-defunct oil exploration company Miller Energy Resources. And last month, a judge dismissed KPMG’s attempt to have the case thrown out. At issue in the lawsuit, filed in 2016, is a […]
KPMG ignored every red flag, ignored the hundreds of millions in fraud on the books - and when the whole thing came crashing down, the responsible KPMG partner kept his job for years, until retiring with a full and fat pension.
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More recently, KPMG made millions by confidently certifying the stability of a large regional bank, assuring investors and depositors that it was managing its risk and could be trusted. The name of the client that KPMG was so bullish on will be familiar to you: #SiliconValleyBank:
https://www.wsj.com/articles/kpmg-faces-scrutiny-for-audits-of-svb-and-signature-bank-42dc49dd
KPMG epitomizes the idea of Too Big To Fail and Too Big to Jail.
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Despite being at the center of virtually every major finance scandal, it continues to thrive and grow. Remember the #Carillion bust, in which billions went up in smoke and swathes of privatized government services vanished overnight? Not only did KPMG sign off on fraudulent Carillion books, but it escaped fines for doing so - *and* got paid to help administer Carillion's bankruptcy:
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KPMG was fined 14.4 million pounds ($17.27 million) on Monday after the accounting firm admitted to providing false and misleading information to its regulator during spot checks on audits of construction firm Carillion and outsourcing firm Regenersis.
Despite this, KPMG continues to find willing buyers for its services. After all, when the sector is dominated by four giant, lavishly corrupt firms, there's not much choice:
https://pluralistic.net/2022/11/29/great-andersens-ghost/#mene-mene-bezzle
This is bad news for the investor class, of course, but it's even worse news for the people who rely on the services that KPMG certifies, even as it helps grifters destroy them. Every kind of business relies on audits, from transit to aviation to day-care to *eldercare*.
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Here's a scary one for you: in Australia, the job of auditing residential eldercare homes' compliance with safety and anti-abuse rules has been outsourced to KPMG. While KPMG earns a mid-sized fortune from these audits, it earns *far* more advising the owners of residential aged care homes on how to beat those audits:
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@pluralistic Yet another reason technological literacy in the population should be prioritized a lot more.
Falsified audits would be a lot harder to keep secret if every resident knew how to publicly call out your bullshit online.
Cory Doctorow
LisPi