Social media exploded over the weekend as the Financial Times reported the big four accounting firms publicly opposed democracy initiatives in Hong Kong. Accounting expert Paul Gillis summarizes the mayhem on his weblog and explains why “the arrogance of the firms is stunning”.
It is assumed by many that the firms were pressured by their clients (the largest of which are Chinese state-owned enterprises) to place this ad. Certainly there are few instances in the past where the firms have spoken out in one voice for social reforms.
The arrogance of the firms is stunning. Did they really think their voice would alter the debate? Do they really think people respect their opinions that much? Did they not see that all they were doing is setting themselves up for ridicule while diminishing their brand worldwide?
The most important question is whether they have impaired their independence on their clients such that they can no longer serve as auditors. Hong Kong follows International Auditing Standards (IAS). …
Based on newspaper reports and tweets many third parties have concluded that the firm’s integrity, objectivity, and professional skepticism have been compromised. Are those reasonable and informed third party conclusions? Certainly there is enough smoke here that the HKICPAs ought to send in a team of firemen to see if there is a fire. But that seems unlikely to happen.
Independence rules aside, the firms would be wise to stay out of politics. Accounting firms have a diverse client base, and a diverse group of partners and staff. Taking a controversial stand on a political issue is bound to alienate many clients, partners, and staff. Is it really worth destroying trust to gain a few political points with certain elite clients?
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