[raesene9]

The EY point is interesting. I'm not sure if it's still this way, but when I worked there, a lot of care was put on audit clients as the partner(s) signing off the work had effectively unlimited liability, and could lose pretty much all their money in a worst case scenario.

Unfortunately audit work, where the company decides on their auditor, has an in-built conflict of interests. If the auditor is too harsh/rigorous, then they risk losing the audit. If they're too lax and miss something material, then they risk lawsuits and regulator attention.

Then for large companies there's further complications liket doing the audit may preclude a company from doing other (more lucrative) consultancy work, or that large companies essentially only use one of 4 companies to do their audits, which leads to people rotating through that but little effective competition.

[chosenbreed37]

> The EY point is interesting. I'm not sure if it's still this way, but when I worked there, a lot of care was put on audit clients as the partner(s) signing off the work had effectively unlimited liability, and could lose pretty much all their money in a worst case scenario.

Does it ever pan out the way? I'm speaking of the liability on the partners. There have been a number of these in recent times involve pretty much all of the big firms.

[bflesch]

Arthur Andersen was a large accounting firm which went bankrupt after their client Enron went belly up. https://en.wikipedia.org/wiki/Arthur_Andersen

[gordon_freeman]

It's a double edged sword for Audit companies. On one hand if they get hard on auditing, their clients may not keep them for longer but on the other hand if they stay soft and more scandals like these happen under their watch then the genuine clients may not keep them because they don't do auditing properly and find issues earlier.

[celticninja]

There actually seems to be very little accountability for the audit firms when this happens.

https://www.google.com/url?sa=t&source=web&rct=j&url=https:/...

[codegladiator]

> If the auditor is too harsh/rigorous, then they risk losing the audit

How is this a thing ?

[stochastastic]

In my experience with auditors, harsh/rigorous does not necessarily mean better because the auditor’s mindset makes an enormous difference. I’ve had process-focused people spend days of their time and mine digging into things that do not have a material impact on results. Unfortunately, even if people have the best intentions, I think that process-focused-but-loose and results-focused-but-rigorous can be easy to mix up, especially for people not in the weeds.

[srhngpr]

Because it is an absolute race to the bottom (on price) when it comes to Big 4 audit. There is really no distinction or difference in services provided between the firms. You can practically switch from EY to one of the other three (if they don't mind excluding themselves from consulting work) overnight.

Disclaimer: work for Big 4 but in tech consulting, not audit.

[sukilot]

OTOH it was the Big 5 until Arthur Anderson gave up its license due to the Enron fraud.

So there's an incentive to audit correctly.

[firethief]

There's the same kind of incentive not to be the closest moth to the lightbulb, and yet....

The race-to-the-bottom/die-at-the-bottom reward structure only prevents disaster if the racers are invested for the long term. The agents in charge will have a high tolerance for that kind of risk if they hope to retire/sell before the money train jumps the tracks. I don't know if that's a hazard this industry is currently falling into, but it's a likely failure mode if nothing sufficiently enforces agents taking a long view.

[bravo22]

Because you can switch to another firm which is more friendly to you.

[watt]

There are certain practices that a company does, and various auditors have different opinions on it. For example, in PCI there are ways of interpreting certain requirements: and when you choose an auditor, you want one that agrees with your approach, and don't want the one that insists on different approach.

[johannes1234321]

Auditing large corps is a profitable business with only a few players "capable" of doing. If one auditor asks too many questions the competitor is happy to take over.