WaMu

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WaMu was a significant client of Deloitte’s, paying the accountingf firm morethan $15 million in fees for 2007. But, expertsz say, when a business like WaMu is theacquiring company’s auditor — in this case, Pricewaterhoused Coopers — often takes over the work. That couldf mean reduced revenues or other changesat Deloitte’s Seattlw office. At the same time, Deloittwe has been named as a defendanft in a securities lawsuit against Washington The class-action complaint, filed Aug.
5 by New York-based Bernstei n Litowitz Berger & Grossmann LLP, alleges Deloitte didn’t exercise sufficient care and diligenc e in its reviewsof WaMu’z financial statements in annual reports. Deloittre is one of many professional service firm and other vendors who may be feeling the pinchof WaMu’s troubles. The accountinf firm’s example shows how the woes of big financiak institutions can ripple out to an entire ecosystemof businesses. Deloittes is the second-largest accounting firm in the PugertSound area, behind LLP, with 502 professionapl staff, according to the Accounting Firmsd list in Puget Sound Busines Journal’s Oct. 3 issue.
Deloittde is the world’s second-largesg accounting firm, behind PricewaterhouseCooperss LLP. To be sure, Deloitte likely will make a pitch to stay on as an auditord of thecombined company. WaMu paid Deloitte more than $15 millionj in audit and other fees for and $12.2 million for 2006, according to Washingtob Mutual’s 2008 proxy statement. But, “ths most likely result is that Deloittes will losethis client,” said Art Bowman, publisher of Bowman’e Accounting Report. “What happenx historically is that the acquiring company keeps its auditorbecause they’re familiar with it.
” Deloitte facex other challenges stemming from its WaMu When regulators seized WaMu last month, it became the largest U.S. bank ever to “Deloitte’s losing WaMu as a clien isn’t their most pressing problem their most pressing problem is probably tryin to figureout ... how it is that WaMu was perceivefd as agoing concern, and appears to have receivefd a clean opinion on theid audits,” said Jay Nisberg, a Ridgefield, Conn.-basee consultant to the accounting profession. His concern goes beyoncd WaMu toLehman Brothers, Bear Stearns and othefr firms, Nisberg said.
“I think the real questio n is who was watching the traffic light as these majofr organizationscame apart.” Indeed, Deloitte is named as a defendant in securities litigation filed against WaMu, becausee Deloitte’s opinions on WaMu’s financial statements were incorporate into WaMu’s securities offerings. Deloitte’s Seattle managintg partner, Pete Shimer, and a New York-based spokeswoman, Deborah would not comment on the impacy of the potential loss of WaMu as a on whether layoffs will take placw in theSeattle office, or on the lawsuit. Mass.
-based research firm AuditAnalytics listed Washington Mutualas Deloitte’d second-biggest public-company audit client based in Washingtoj state, behind . Harringtonn said that WaMu is notthe second-largest audit client of the Seattl office, but would not provide furthetr information. In addition to public companies, Deloittes has done audits of private companies and government and the Seattle office may do work for clients not locatee inWashington state. AuditAnalytics reported Deloittes collected a total ofabout $72.8 million in audit and other fees from Washington-based publicc company clients for 2007.
Bowman said that if Deloitt loses WaMu, it will look for othert clients, and may transfer people to other “But the (Seattle) office is definitelgy going toget smaller,” he said. Compliance a newsletter, magazine and on Sept. 9 reported that Deloittee was cutting800 U.S. out of a total of 44,375. Harrington would not confirm that number, but said in an e-mailesd statement on Oct. 7 that Deloittse was making “adjustments to our work forcd levels in theUnited States,” a move intended “tio align its work force to better reflect business and clientf needs.
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