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how the financial turmoil is affecting the big 4

Wow. What a crazy market it's been the last couple weeks. Among the casualties..Lehman, Merrill and AIG. The Fed decides to bail out AIG, but not the stock holders. They then decide to ban short selling on financials. Now there are rumors that they're trying to help take distressed assets of company books. Unbelievable. Potentially a $1 trillion plan. Investing currently is not for the faint of heart. For those who haven't really been following what's going on, please do so. This is stuff for the ages.
Anyway, enough rambling. So how is this affecting the big 4? I had a conversation with some partners concerning this issue, and they believe that the big 4 are "recession-tolerant", not "recession-proof". Yes, clients are fighting back on the fees this year more than ever before. Yes, some clients are being swallowed up by the market and thus no longer exist. Yes, they're using this "crisis" as an excuse to offer lower raises than in years past. Yes, there have been layoffs in some of the big 4, most notably Deloitte. So how is it "recession-tolerant"?
Companies may be reeling, but they still need their financials to be audited. Heck, banks will probably want more conservative financials in order to provide financing to companies. According to one partner, VCs are sitting on lots of cash, or "dry powder", and thus start-ups shouldn't have much trouble finding financing. I'm not sure about that, but he probably knows more about me. Hiring might be lower than previous years, but hey, they're still hiring. All in all, it's a little rocky right now, but nothing compared to the financials sector. I'd still agree with the fact that a majority of us have pretty good job security.


Anonymous said…
For those of us that have offers now to start next fall, do you think we will be affected?
notfordisplay said…
Highly unlikely. Unless something unforeseen happens over the next year or so (stockholders sue auditors of the collapsed firms, etc.), you should be in good shape.
Tex said…
Big 4 do a lot past Audit and Tax (maybe not a lot in reltive money terms but a lot in # of services). Transaction advisory, business process advisory,etc.

Those other services will be effected. Combine this with the dramatic drop in demand for Sox services and it can be nervous time for folks outside of assurance or tax.
Anonymous said…
I can't speak for all of the firms, but the one I work for would never renig an offer from a graduating student for fear of ruining their reputation on campus and being "black-balled" at the university. It is more likely that they would lay off 2nd year associates than take back offers for incoming new hires. I think you're safe.
Anonymous said…
Can you comment on forensic accounting within the big four: what its like, compensation, exit opportunities?

notfordisplay said…
I honestly don't know much about that group in my firm. I know they've had layoffs recently. Their compensation is pretty similar to the audit profession. You travel a lot. Things are pretty slow right now in that field.
Krupo said…
Forensic depends on where you're located, and on who discovers there's fraud that needs investigating. Sometimes crazy-busy, sometimes as LoA/nfd puts it, not.
Anonymous said…
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Revisor said…
nice post, very informative now i know. thanks for posting!

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