The aftermath of the Enron bankruptcy caused Arthur Andersen countless legal problems, culminating in Andersen's exit from the auditing of public companies in US, and later from global arena. Before its decision to cease providing US audit services many of Arthur Andersen clients had decided to change auditors and Andersen's global network began to be acquired by the remaining Big Four firms. The measured approach has yielded many new audits around the world, particularly in the US, where nearly 300 prominent companies formerly Arthur Andersen clients are now audited by PwC.
In addition, there is 3,500 former Arthur Andersen staff, which was welcomed into PwC ranks. (PwC 2002 Global Annual Report: 27) Competences: 2) That are better than competitors and difficult to imitate or substitute PwC continues in a leading position in major industries, serving 76 percent of Global Fortune 500 companies in Consumer and Industrial Products and Services; 86 percent in financial services and 86 percent in Technology, InfoComm and Entertainment.
This advantageous position on the global market has benefited for PwC in Financial Resources – for the year ended 30 June 2002, PwC' net revenues were $13. 8 billion, owing to economic conditions in certain geographic regions. (PwC Global Annual Report 2002:1) Talking more about the competences, I can draw samples based on my own work experience with PwC, Baku office in Azerbaijan (see appendix 3). I have noticed that PwC has a tendency to hire students who have graduated from western Universities and professionals who work for government and larger national organizations and corporations.
Having offered them part time or full time jobs, PwC would make an invaluable contribution into its local intangible assets fund, as it extends their knowledge in local system of taxation and statutory audit. By hiring those, I call them 'strategic specialists', PwC has located itself into, possibly, the best position from the point of investigation of the opportunities of the local and regional markets and specifics of local mentality. This enables the establishment of tight connections with large national organizations and governmental institutions.
This advantageous strategic position has enabled PwC to capture the majority of the projects in audit and taxation within Azerbaijani national companies and organizations. The advantages of knowing the regions demands could allow PwC to extent its services to neighbouring countries Georgia and Armenia. There PwC could also obtain a leadership position having occupied big projects both in Financial Service, Energy, and Taxation. It is also pertinent to discuss the good reputation of PwC, which has been constructed over the years whilst providing a quality service.
This can be described as an attraction to client and prospective employees alike. I feel this cannot be imitated by any company. Has the organisation gained any sustainable competitive advantages as a result of the above? Explain why or why not Due to the recent crisis events and economic recession the Big Four accounting firms in Great Britain have suffered a 16% fall in income from their FTSE 100 audit clients, according to a survey conducted by the magazine Accountancy.
The annual FTSE 100 auditor fees survey, using the company annual reports, shows that the firms earned a total of 714m, down from 848m in 2002. Despite Enron, non-audit-fees still account for two thirds of fees earned by FTSE 100 auditors, the survey indicating an average non-audit to audit of 1. 9:1. But this ratio has fallen from 3: 1 in 2002. PwC' sale of its consulting services (called MONDAY) to IBM, difficult economic conditions and a reduced amount of mergers and acquisition activities in the financial period covered by the survey are all likely to have contributed to the fall. The firms however, have enjoyed an increase of 17% in fees earned from statutory audits.
PwC continued to dominate with a 41% share of audit fees and a 45% share of all fees earned by FTSE 100 auditors worldwide. (Accountancy; Sep2003, Vol. 132 Issue 1321:5) Any other comments? (Here for example you may discuss recent developments or plans in the company) Concern of PwC as well other members of BIG 4 after Enron & Arthur Andersen crisis, has made them all concentrated on corporate reporting and in this particular case PwC issued a book based on this subject.
In Building Public Trust, The Future of the Corporate reporting, Samuel A. DiPiazza, Jr., the CEO of PwC, and Robert G. Eccles, the president of a consulting firm and a "senior fellow" of PwC, provide their prescription for post-Enron/Andersen reform of corporate reporting. DiPiazza and Eccles call for a re-examination and strengthening of the "corporate reporting supply chain. " This comprises all company executives, boards of directors, independent auditors, information distributors, third-party analysts, investors, and other preparers and users of corporate reports. The chain is supported by standard setters, market regulators, and enabling technologies.
(The International Journal of Accounting, Volume 38, Issue 3, autumn 2003, Pages 391-394). A new Model for Corporate Transparency (S. DiPiazza, Building Public Trust: 15) Despite of the many ongoing efforts to improve how the markets function, each group involved has its own goals and its own rather narrow view of what will make things better. The market requires a larger organizing framework that will focus all of these efforts on the overarching goal of ensuring that investors and other stakeholders get the information they need to make appropriate decisions.
Exhibit below offers such a framework, developed by Samuel Di Piazza (Building Public Trust: 15) A new Model for Corporate Transparency The Three-Tier Model of Corporate Transparency is one alternative for a new vision of the future of corporate reporting. Much is being done today to make each of these tiers a reality. The model's three tiers include: 1. A set of truly Global Generally Accepted Accounting Principles (Global GAAP) 2. Standards for measuring and reporting information that are industry-specific, consistently applied, and developed by the industries themselves.
Guidelines for company -specific information such as strategy, plans, risk management practices, compensation polices, corporate governance, and performance measures unique to the company. (S. DiPiazza, Building Public Trust: 15) This model does not ask companies to report information in three disconnected tiers. Investors and other stakeholders will benefit fully only if companies communicate the information in each tier in an integrated fashion that provide integral view of the enterprise – its marketplace opportunities, its strategies and their implementations, its value drivers, and its value outcomes.