Deloitte Mum On Layoffs
Big Four accounting firm won’t explain impact on Connecticut
By Greg Bordonaro
gbordonaro@HartfordBusiness.com09/22/08
Deloitte & Touche, the Big Four accounting firm, sidestepped questions last week about how its reported layoff of about 800 professionals and staff members nationwide affects its Connecticut operations.
Carl R. Johnson, managing partner, Blum Shapiro
Deloitte has the third largest accounting staff in Greater Hartford, with 71 local CPAs and 321 staffers as of January. It also has offices in Stamford and Wilton.
The firm recently confirmed to the trade publication Compliance Week that it was dismissing about 800 of its 45,000 employees across the country, mainly in its audit and risk consulting services.
When asked by The Hartford Business Journal to confirm that national number and provide fresh details about the impact in Connecticut, Deborah Harrington, a spokeswoman for Deloitte, issued the following in a written statement:
“In a move to align its work force to better reflect business and client needs, Deloitte is taking a number of steps to reduce costs in some of its businesses affected by the overall slowdown in the economy, including adjustments to our work force levels in the United States.
“Overall, we continue to grow and expect a net increase in personnel in [2009],” she said.
Experts said the Deloitte layoffs could be matched by similar moves by the other Big Four accounting firms, Price Waterhouse Coopers, Ernst and Young and KPMG.
“I would imagine that there might be other reductions,” said Mohamed E. Hussein, a department head and professor of accounting at the University of Connecticut. “But I don’t think it will last that long.
Blum Shapiro & Co. of West Hartford, a leading regional firm, reported an uptick in interest from former Big Four employees. “In the last 18 months, there have been more inquiries from Big Four employees,” said Carl R. Johnson, Blum Shapiro’s managing partner.
Hussein said turnover at public accounting firms isn’t uncommon, but during good economic times people tend to leave on their own, taking higher positions at smaller companies. But as the economy sputters, smaller firms don’t hire as freely, which means Big Four staffs don’t turn over as quickly.
“That natural attrition isn’t taking place right now,” Hussein said.
Sarbanes Oxley
One likely factor in the Deloitte layoffs is the recent relaxation of compliance standards called for in the Sarbanes Oxley Act, said Barry Epstein, a partner at the Chicago accounting firm Russell Novak and Co.
The law was enacted in 2002 in response to major corporate and accounting scandals. It created intricate compliance rules for public companies, requiring them to upgrade internal controls over their financial reporting.
“The big firms had a feast on this, charging large extra fees as the clients had no choice,” Epstein said.
But now, a lot of the basic compliance work has been completed and federal regulators have adopted simpler rules that require less work by outside accountants, Epstein said.
Recent extreme turbulence on Wall Street could emerge as another factor leading to Big Four layoffs.
“If two large companies merge, you need one less auditor,” Hussein said.
Bear Sterns was bought by JP Morgan Chase, and Merrill Lynch was recently purchased by Bank of America. Bear Stearns and Merrill were Deloitte clients.
On the positive side for accounting firms, regulators have moved to require U.S. businesses to adopt global accounting rules. That could create significant new work for accounting firms and stimulate hiring, Hussein said.
By Greg Bordonaro
gbordonaro@HartfordBusiness.com09/22/08
Deloitte & Touche, the Big Four accounting firm, sidestepped questions last week about how its reported layoff of about 800 professionals and staff members nationwide affects its Connecticut operations.
Carl R. Johnson, managing partner, Blum Shapiro
Deloitte has the third largest accounting staff in Greater Hartford, with 71 local CPAs and 321 staffers as of January. It also has offices in Stamford and Wilton.
The firm recently confirmed to the trade publication Compliance Week that it was dismissing about 800 of its 45,000 employees across the country, mainly in its audit and risk consulting services.
When asked by The Hartford Business Journal to confirm that national number and provide fresh details about the impact in Connecticut, Deborah Harrington, a spokeswoman for Deloitte, issued the following in a written statement:
“In a move to align its work force to better reflect business and client needs, Deloitte is taking a number of steps to reduce costs in some of its businesses affected by the overall slowdown in the economy, including adjustments to our work force levels in the United States.
“Overall, we continue to grow and expect a net increase in personnel in [2009],” she said.
Experts said the Deloitte layoffs could be matched by similar moves by the other Big Four accounting firms, Price Waterhouse Coopers, Ernst and Young and KPMG.
“I would imagine that there might be other reductions,” said Mohamed E. Hussein, a department head and professor of accounting at the University of Connecticut. “But I don’t think it will last that long.
Blum Shapiro & Co. of West Hartford, a leading regional firm, reported an uptick in interest from former Big Four employees. “In the last 18 months, there have been more inquiries from Big Four employees,” said Carl R. Johnson, Blum Shapiro’s managing partner.
Hussein said turnover at public accounting firms isn’t uncommon, but during good economic times people tend to leave on their own, taking higher positions at smaller companies. But as the economy sputters, smaller firms don’t hire as freely, which means Big Four staffs don’t turn over as quickly.
“That natural attrition isn’t taking place right now,” Hussein said.
Sarbanes Oxley
One likely factor in the Deloitte layoffs is the recent relaxation of compliance standards called for in the Sarbanes Oxley Act, said Barry Epstein, a partner at the Chicago accounting firm Russell Novak and Co.
The law was enacted in 2002 in response to major corporate and accounting scandals. It created intricate compliance rules for public companies, requiring them to upgrade internal controls over their financial reporting.
“The big firms had a feast on this, charging large extra fees as the clients had no choice,” Epstein said.
But now, a lot of the basic compliance work has been completed and federal regulators have adopted simpler rules that require less work by outside accountants, Epstein said.
Recent extreme turbulence on Wall Street could emerge as another factor leading to Big Four layoffs.
“If two large companies merge, you need one less auditor,” Hussein said.
Bear Sterns was bought by JP Morgan Chase, and Merrill Lynch was recently purchased by Bank of America. Bear Stearns and Merrill were Deloitte clients.
On the positive side for accounting firms, regulators have moved to require U.S. businesses to adopt global accounting rules. That could create significant new work for accounting firms and stimulate hiring, Hussein said.
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