After reading the data for the 100 largest accounting firms, I realized the CPA industry can provide a frame of reference for the magnitude of fiascos we are seeing in the banking industry. Discussion of that article is here.
My wild guess is here for the total fines for manipulating forex rates: a range of $11B to $16B with point estimate of $13B.
Sixteen billion is just a number with lots of zeros. Let’s look at that number in relation to revenue in the CPA profession.
My estimate suggests the fines on the banks on the low side will be in the range of the total annual billings in the U.S. of the CPA firm of PriceWaterhouse Coopers, which revenue is generated by 35,700 professionals.
The range of low to high in my estimate is equal to half the annual billings of Ernst & Young. Their total billings are generated by 28,800 professionals, so the work of 14,400 CPAs is equal to the width of the range I am guessing.
The amount blown by the TBTF banks because some of their staff wanted to cheat customers on foreign exchange rates is roughly equal to the annual billings of between 35,700 and 50,100 accountants at Big 4 firms.
Here’s the formula for my guess on the combined forex fines:
- range of 1.0PwC up to 1.0PwC+0.5EY with a point estimate just under 0.9Deloitte.
For future reference, consider the amount of revenues for the following firms:
- $14,908M – Deloitte
- $11,724M – PwC
- $ 9,900M – Ernst & Young
- $ 6,870M – KPMG
- $ 1,471M – McGladrey
- $ 1,383M – Grant Thornton
- $ 833M – BDO
- $ 687M – Crowe Horwath
Consider the following staffing levels:
| partner | prof staff | Pntr & prof | total staff | |
| Deloitte | 3,030 | 50,562 | 53,592 | 64,884 |
| PwC | 2,691 | 33,024 | 35,715 | 41,571 |
| Ernst & Young | 2,700 | 26,100 | 28,800 | 4,000 |
| KPMG | 1,813 | 20,113 | 21,926 | 27,102 |
| McGladrey | 644 | 5,075 | 5,719 | 7,062 |
| Grant Thornton | 529 | 4,692 | 5,221 | 6,456 |
| BDO | 346 | 2,967 | 3,313 | 4,041 |
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