HILARY JOFFE: McKinsey beware … a fishy reputation has the potential to gut a global company
‘The firm seems at last to have begun to take the issue seriously at a global level’
When the US energy utility company Enron filed for bankruptcy in 2001, it took its auditors down with it.
At the time, Arthur Andersen was one of the big five global accounting firms. It had already been implicated in two substantial audit failures and should have been on guard against another client failure, especially one as large as Enron, which was the firm’s second-largest revenue earner. As it turned out, there had been significant concerns within the firm about the dodgy Enron dealings the audit team was signing off. But Andersen was earning so much from other Enron consulting fees, as well as audit fees, that its independence was completely compromised — and it didn’t walk away from its client until it was too late to save itself. Then there was Monitor, a global strategy consultancy that used to play in the big league with management consultancies such as Bain and McKinsey. That was until Monitor went bust and was bought out by Deloittes in 2013. The work Monitor did for Libya couldn’t have helped. Monitor was hired by Libyan leader Muammar Gaddafi’s government in 2005 to consu...