Trust Misplaced at the Big Four Accounting Firms Inside China

Not sure if any of you have noted the long running efforts by the SEC to get the truth out of how fake Chinese companies were able to get good ratings from the Big Four to be listed on the US stock exchange.

The Big Four want this to go away. They vetted these companies in China, and this misled investors in the West and led to many firms being delisted after billions of dollars were lost all around.

I note a more recent article in this saga here.

At minimum, the Big Four have not served investors well in their work in work in China. Many firms they have vettted have proven to have inaccurate accounting records.

After Arthur Andersen totally folded in the wake of the Enron scandal, the remaining Big Four were more careful. Surely, Deloitte did not purpose to mislead Western investors.

Do you think their Chinese staff lacked ablity or lacked character when faced with payments and favors to overlook problems as surely happened?

I feel pretty confident that the Big Four have been pretty resume focused in hiring and put tons of pressure on their people to produce and appear perfect before customers.

I feel confident Delloitte did not tell the SEC that there was a  good chance that some of the most important numbers were fixed in the case in the article.

I have had experienced Chinee businessmen tell me that you cannot trust US firms in China below the top management and then only if Western. “Below the owner”, he said, “they are a lot like any state owned company.”

Things will be a mess as long as Western Companies and their affiliates keep hiring Chinese people on perfect resumes and expecting then to have character under pressure and temptation. It is a false assumption to think dishonest people will be honest just because they carry a Deloitte namecard.

All Western companies need to pay more close attention to character in hiring especially when they are hiring for a position that needs high integrity.  Further, big international head hunting companies are not the place to go as you see where it got the Big Four.  I again and again see where they take these poor big firms.

Thoughts?

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Posted in: China, Chinese Culture, Leadership

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  1. Mark January 24, 2013

    You are right on the money. This is true irrespective of company or industry. When will western companies get it? Apparently, never. Good post.

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