I have 600+ movie DVDs in my collection. One of my favorites is the 1998 American film Godzilla.
The fictional story is simple. Decades ago, French testing of nuclear warheads resulted in irradiated lizard eggs. One egg hatched a mutant lizard that grows 200 times what should be its normal size. It travels to NYC in search of the perfect habitat for laying eggs. Much mayhem results.
Stated another way, Godzilla is an account about the impact of artificial stimulants on a lifeform. As a result, the lifeform grows to gargantuan size and causes incalculable damage when it runs amok. How do humans react after an encounter? With terror. The monster is too large and powerful. It is impervious to human attempts at control
In the preceding image, Dr. Niko Tatopoulos is the human hero of Godzilla (1998) who comes face to face with the monster. He realizes that he has no power to control or influence the monster’s behavior.
Metaphorically speaking, I wonder if the very largest international audit firms are Godzilla (or “Gojira” as the Japanese fisherman mutters), and if investors are Tatopoulos. At one time, audit firms existed in natural form. They were small and plentiful. Financial statement audits were voluntary. Auditors had a positive public image and a reputation for honesty and integrity. Heads of larger firms were legendary. Then the Securities Act of 1933 and the Securities and Exchange Act of 1934 changed the environment. Public corporations were required (by these laws) to secure audits of their financial statements. A regulated industry of public auditors was created, receiving a government sanctioned monopoly to provide these financial statement audits. Responding to this disruption in their natural environment, audit firms began to grow in size, becoming international in scope. In addition, their reason for being evolved to partnering with corporate management from protecting investors. Although an attempt was made to control them (PCAOB), the recent crisis has proven that the large firms are too powerful to control
In financial crisis after financial crisis, a cry has gone up, “Where were the auditors?” (here and here and here) I wonder if the answer is “Godzilla,” a moster of such power that it is beyond control.
No, I’m probably off track with this musing. Although the largest firms are TFTF (“Too few to fail” coined by Francine McKenna) according to U.S. government policy, and the firms themselves see no potential liability issues to threaten their survival, the large audit firms aren’t monsters. After all, they protect investors and serve the public interest. Don’t they?
Debit and credit – – David Albrecht