Auditors Shouldn't Have Long-Term Relationships

Following the financial meltdown of a key government contractor in the U.K., Carillion Plc., legislators and professionals are discussing the breakup of the Big Four auditing firms. Carillion’s demise caused the debate because, as the construction firm grew increasingly reckless in taking on projects and using creative accounting, KPMG, one of the Big Four, remained its auditor for 19 years – and failed to alert shareholders and regulators of the impending disaster. PwC became Carillion’s liquidation administrator because it was the only one of the Big Four firms that didn’t have a conflict of interest.