Title: Bean Counters – The Triumph of the
Accountants and How They Broke Capitalism
Author: Richard Brooks
A well-researched book that starts with tracing the history of double entry
booking keeping and its growth, need and usefulness to the industry from 1200
AD to its present state. It vividly traces the growth in stature of the “bean
counters” in the US, UK and European countries. A reader will find interesting
history of formation and merger and consolidation of firms leading to the Big 4
firms in its current avatar.
Interesting observations on the political
influence across countries of the Big 4 will be both a delight and an eye
opener for any serious reader and observer on the stature and influence of the
Big 4, while the same firms (in spite of rotation) controlling 99% of the
market. The styling of Big 4 in US and UK makes interesting reading which the
author details out in the book.
A view pre and post 1980 on the defined role
of Auditors by the author cannot but be missed by the reader where he observes
that “for generations members of these huge influential practices considered
themselves who happened to be in business but beginning 1980 they saw
themselves as businessmen who happened to be in profession.”
The author observing that the displaced key
performance indicators of Big4, being revenue growth and improved profit
margins followed by measures of staff and customer satisfaction while exposing
false accounting, fraud, tax evasion and risks to economies’, (everything that
the society might want from accountants) not featuring at all as a performance indicator of the firms, raises a basic question on the
very model that the firms have now become.
The observation on devising of legal
structure of the firms for worldwide domination while escaping the
responsibility away from home by the HQ by distancing itself from local
misdeeds elsewhere in the world, while profitably exploiting the name, brand
and commercial networks spills the beans of the operation of the Big 4. For the
few past decades all the firm’s global growth coming from selling more
consultancy services while its talent of turning any change into fee earning
opportunity discloses the growth strategy. In the digital age, cyber security is
the latest major growth engine for the firm’s consultants and now audit fees
worldwide account for 39% while it is 21% in UK making them consultancy firms
with auditing sidelines, rather than the other way around.
The author’s observations on the manner in
which the British Accountancy firms converted to LLP by stating it as “a shabby
episode in accountancy history” will not be missed by a reader. When the
Companies Act 1989 allowed accountants to operate as limited liability
companies, the partners were more wedded to the partnership for the tax
advantage that came with being self-employed rather than company directors.
The ease of sending money across borders in
the age of financial liberalisation allowed the multinational companies to
break up businesses and park more profitable parts where they would be lightly
taxed and the “bean counters showing them (the companies) how to do it by
exploiting their expertise thereby siphoning billions of euros from hard
pressed economies” shows the bean counters in poor light. It is interesting to
note that the users of such services are leading multinational multibillion
dollar companies, goes to showcase the inter dependency of the multinational
and the Big 4.
A list of hundreds of active tax products
under various acronyms by the bean counters makes the author opine that “in
simple truth these were little more than shams.”
The author’s bold statement on the mastered
art of “revolving door” of senior personnel brings closeness that breeds
uniform market oriented view of the public and provides an insight into the
prevalent practice. “So smoothly and frequently the revolving door is spun that
it creates a realistic hope amongst ministers and mandarins that subject to
keeping them happy the Big 4 will present career opportunities to supplement
their pensions.”
The 2008 financial crisis proved to the
contrary the assertions of President Bush that “era of false profits are over”
just six years earlier, speaks volumes about the unreformed and unrepentant
approach and influence of the Big 4. The author clearly links a clear nexus
during the period in the US towards lobbying donations to senators and
Congressmen through political action committee by the Big 4 employees hitting
record levels and the reforms being blocked fairly easily.
The author has very pertinent and far
reaching suggestions that cover separation of accounting and consultancies,
having strong independent regulations, bring in transparency, suggesting public
auditing of major institutions of the government, ending the “quadropoly” which
brings accountability demands an immediate detailed relook.
The book published this year by
AtlanticBooks, UK comes in at the most appropriate time for India when read in
the backdrop of recent Hon. Supreme court judgement of February 2018 and the
vision of the Hon. Prime Minister of India, on Indian Audit firms becoming
world leaders. Any serious reader and well-wisher of audit profession of our
country will find that this book serves a road map towards establishing a new structure
of the audit profession by learning from the mistakes of the West so very well
documented in book.
