Conversations with the Big 4 Accounting Firms’ Chief Executives

Abstract

INTRODUCTION I recently had the opportunity to meet individually with the Chief Executive Officers hereafter, CEOs of the Big 4 accounting firms. Each of these persons, Mr. Timothy P. Flynn of KPMG LLP, Mr. Dennis M. Nally of PricewaterhouseCoopers LLP, Mr. James S. Turley of Ernst & Young LLP, and Mr. James Quigley of Deloitte LLP, graciously agreed to meet with me in their New York City offices during late summer and early fall 2007 so that I could interview them and then write this article. In what follows, I first provide some reflections on these meetings, and then I specify the questions I posed and report the answers I received from the CEOs. Importantly, there were no restrictions imposed on my questions—I asked questions in which I thought members of the academy would have the greatest interest. Finally, although I asked the same core questions of all of the Big 4 CEOs, certain responses stimulated follow-up questions to some but not all of the CEOs. Lastly, in the interest of parsimony, I sample from the responses of each interviewee rather than exhaustively include all responses. Inasmuch as the most recent five years have been momentous—with the exit of Arthur Andersen LLP from the public company audit arena, the passage of the Sarbanes-Oxley Act SOX , and, in turn, the establishment of the Public Company Accounting Oversight Board PCAOB — one can make a case that we have just come off of the greatest five-year period of change in the world of public accountancy. These CEOs, as much as any four persons, have been at the center of such changes and thus are uniquely qualified to speak about them and to contemplate what the future is likely to hold. The questions I posed, which inform the organization of this paper, fall into four categories: 1 Auditing, Regulation, and the Firms; 2 the State and Future of the Public Company Auditing Profession; 3 Auditing Practice, Research, and Education; and 4 Personal Reflections. I also offer concluding observations in the final section of the paper.