The Shoemaker’s Children… The Big Four And Their Own Broker-Dealers

Did you know that each of the Big Four audit firms and some of the next tier also run SEC-registered broker-dealers? Although they don’t hold customer money, yet, they do count on the capital from their own partners to fund them. Given the poor record the auditors, all of them, have auditing broker-dealers, you’d imagine that the Big Four would take special care to make sure the audits of their own firms followed all the rules all the time and were of the highest quality, beyond reproach.

You’d be imagining wrong.

I wrote at Medium.com about this strange irony, “When Big Four Audit Firms Need An Audit They Choose Cheap”.

What’s worse than the auditors’ failures to prevent, detect and mitigate these frauds, failures and illegal activities at their clients is that the Big Four global audit firms choose the cheapest auditors or the least qualified — or both — to cover the regulatory requirement to file an audit opinion for their own broker-dealer units. In one case, the audit firm chosen by a Big Four firm was slow to comply with the requirement for PCAOB registration.

The Big Four choose cheap, unqualified firms to audit their own broker-dealers — firms funded with partners’ capital contributions. Why would the Big Four global audit firms force broker-dealer audit clients to do more and spend more to protect customers?

What is the SEC and PCAOB waiting for? Another MF Global or PFG Best to prove that this industry—broker-dealers and the auditors who are supposed to safeguard customers’ funds— needs a complete overhaul?