The one section of the the establishment which has so far escaped scot-free are the auditing firms, in particular the “Big 4”, KPMG, PWC, Ernst & Young and Deloitte. These firms gave a clean bill of health to the banks as late as 2008.
In November 2007, Ernst & Young told us that Anglo was a good business, despite the fact that months later we would be bailing that bank out to the tune of billions, while they racked in hundreds of millions of Euro. Why did these companies not highlight the Wild West practises in Irish banks like the transferring of loans between banks? The unsustainable loan books?
An auditing firm is supposed to give a ‘true and fair’ opinion on a companies books. As they often deal with major institutions like banks, there is considered to be a ‘public service’ aspect to the work they do because of the importance of banks to an economy. But as capitalist organisations their fundamental aim is to make profits, and this is the prime factor in the role they play.
Not only did they provide auditing services to the banks, they also provided other services like consultation, human resources, which were much more profitable to them. Scandalously, this includes providing companies with schemes for how they can avoid paying tax – KPMG had to pay a fine of €456 million in 2005 for helping a company avoid a tax bill for €2.5 billion.
This exposes the conflict of interest for the Big 4. Rather than provide critical audits and risk losing other more lucrative contracts, they completed audits aimed at winning the favour of management.
The banks and the auditors built up profitable relationships over the years, with banks using the same auditors for many years. This cosy relationship was further enhanced by a cross-over of staff between the companies, Sean Fitzpatrick for instance had worked for Ernst & Young.
If financial regulators were ‘asleep at the wheel’, then the auditors were criminally negligent. Despite this they are still receiving contracts worth hundreds of millions of Euro from the state by auditing many of the bailed out banks which they audited before the crash!