Friday, March 17, 2006
How Nortel, auditor became joined at hip
Nortel Networks Corp. has faced years of financial statement restatements, accounting crises, a roller-coaster stock price, and changes to executive management, but throughout it all, Deloitte and Touche LLP has been a constant.
Deloitte, the world's biggest accounting services firm, has held on to the Nortel account even in the company's darkest times.
During Nortel's restatement years, Deloitte was paid $57 million in 2004 and $72.7 million in 2003 -- for what amounts to the largest fees in those years for audit, tax and related services paid by any Canadian company.
But after Nortel's decision last week to restate its accounts for the third time in as many years, the issue that's puzzling many is how Deloitte has held on to the Nortel account.
"It's a question we've been asking since last year at the [Nortel] annual meeting," said Bill Mackenzie, president of governance watchdog Fairvest Corp.
One answer is that other auditors are not in a position to do a better job than Deloitte, and might not be willing or able to tackle Nortel, Mr. Mackenzie said.
Nortel's sprawling business is "so complex," that it's difficult for any auditor to understand, he said. In fact, Deloitte's experience means the firm has the best knowledge of Nortel of any of the audit firms, Mr. Mackenzie said. And while it could seem like a sensible option to have another set of eyes look at the accounts, there have already been "a lot of fresh eyes on the Nortel accounts," he said.
posted by Brian Moran @ 10:35 AM