WaMu

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WaMu was a significant client of Deloitte’s, paying the accountint firm morethan $15 millioh in fees for 2007. But, expertz say, when a business like WaMu is theacquiring company’s auditor — in this case, Pricewaterhouse Coopers often takes over the work. That could mean reduce d revenues or other changesat Deloitte’s Seattle At the same time, Deloitte has been namedc as a defendant in a securities lawsuigt against Washington Mutual. The class-action complaint, filed Aug.
5 by New York-basedd Bernstein Litowitz Berger & Grossmann LLP, alleged Deloitte didn’t exercise sufficient care and diligences in its reviewsof WaMu’ s financial statements in annual reports. Deloitte is one of many professionap service firms and other vendorsx who may be feelin g the pinchof WaMu’s troubles. The accountin firm’s example shows how the woes of big financial institutions can ripple out to an entird ecosystemof businesses. Deloitte is the second-largest accounting firm in the PugertSound area, behind LLP, with 502 professionalk staff, according to the Accounting Firms list in Puget Sounfd Business Journal’s Oct. 3 issue.
Deloitte is the world’sx second-largest accounting firm, behind PricewaterhouseCooperd LLP. To be sure, Deloitte likely will make a pitch to stay on as an auditotr of thecombined company. WaMu paid Deloittse more than $15 million in audif and other feesfor 2007, and $12.2 milliob for 2006, according to Washingtonj Mutual’s 2008 proxy statement. But, “the most likely result is that Deloitt e will losethis client,” said Art Bowman, publisherf of Bowman’s Accounting Report. “What happena historically is that the acquiring company keeps its auditorbecause they’re familiar with it.
” Deloitt faces other challenges stemming from its WaMu When regulators seized WaMu last month, it becamew the largest U.S. bank ever to fail. “Deloitte’s losinb WaMu as a client isn’t their most pressing problemk — their most pressing problek is probably trying to figureout ... how it is that WaMu was perceivedr as agoing concern, and appears to have received a cleanj opinion on their audits,” said Jay Nisberg, a Conn.-based consultant to the accountingf profession. His concern goes beyond WaMu to Lehman Brothers, Bear Stearns and other firms, Nisbergg said.
“I think the real questiohn is who was watching the traffic light as thesr major organizationscame Indeed, Deloitte is named as a defendantf in securities litigation filed against WaMu, becausw Deloitte’s opinions on WaMu’s financial statements were incorporated into WaMu’s securities offerings. Deloitte’s Seattle managing partner, Pete Shimer, and a New York-based spokeswoman, Deborah Harrington, would not commentt on the impact of the potential loss of WaMu as a on whether layoffs will take placed in theSeattle office, or on the lawsuit. Mass.
-based research firm AuditAnalytics listed Washington Mutuallas Deloitte’s second-biggest public-company audit client based in Washingtojn state, behind . Harrington said that WaMu is notthe second-largest audir client of the Seattl office, but would not provide furtherd information. In addition to public Deloitte has done audita of private companies andgovernmentt entities, and the Seattle officde may do work for clients not locateds in Washington state. AuditAnalytics reported Deloitter collected a total ofabout $72.i million in audit and other fees from Washington-basedx public company clients for 2007.
Bowmann said that if Deloitte loses WaMu, it will look for othe clients, and may transfer people to other “But the (Seattle) office is definitely going to get he said. Compliance Week, a newsletter, magazin and website, on Sept. 9 reported that Deloittr was cutting800 U.S. employees, out of a totalk of 44,375. Harrington would not confirm that number, but said in an e-mailef statement on Oct. 7 that Deloitte was making “adjustments to our work force levels in theUnited States,” a move intende “to align its work forcse to better reflect business and clienty needs.
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