Deloitte
| Deloitte's brand logo | |
| Company type | Swiss Verein |
|---|---|
| Industry | Professional services |
| Founded | London, United Kingdom (1849) |
| Headquarters | New York City, New York |
Key people | William G. Parrett, CEO Piet Hoogendoorn, Chairman |
| Products | Audit Tax Consulting Enterprise risk services Financial advisory |
| Revenue |  $18.2 billion USD (2005) |
Number of employees | 121,283 (2005) |
| Website | www.deloitte.com |
Deloitte Touche Tohmatsu (branded as Deloitte) is the second largest professional services firm in the world after PricewaterhouseCoopers and one of the Big Four auditors, a group of the largest international public accountancy firms. At $18.2 billion USD, it earned the second most revenue out of the Big Four in 2005 (PricewaterhouseCoopers brought in $20.3 billion in 2005). In addition to its accounting practice, Deloitte is one of the largest business advisory firms in the world, providing strategic and operational management consulting services to Fortune 500 companies.
It was previously known as Deloitte & Touche, which was formed by the merger of Touche Ross and Deloitte Haskins & Sells (outside of the UK) in 1990.
Confusingly, in the United Kingdom the local firm of Deloitte, Haskins & Sells merged instead with Coopers & Lybrand (which today is PricewaterhouseCoopers). For some years after the merger, the merged UK firm was called Coopers & Lybrand Deloitte and the local firm of Touche Ross kept its original name. In the mid 1990s however, both UK firms changed their names to match those of their respective international organisations.
In 1993, the international firm was renamed Deloitte Touche Tohmatsu, the third name coming from the firm Tohmatsu & Co, which merged into Touche Ross in 1975. The names in the company title refer to William Welch Deloitte, George Touche, and Admiral Nobuzo Tohmatsu. The name "Deloitte" is the firm name in longest continuous usage in the accounting profession. Deloitte Touche Tohmatsu is a Swiss Verein, a membership organization under the Swiss Civil Code whereby each member firm is a separate and independent legal entity. Its global headquarters are located in Manhattan, New York City.
According to the firm's website, as of 2004, Deloitte had a total of 115,000 professionals at work in nearly 150 countries, delivering audit, tax, consulting and financial advisory services to more than one-half of the world's largest companies.
As of 2005, Deloitte & Touche USA LLP, Deloitte's U.S. firm, provides professional services through over 33,000 people in the U.S. Services are provided by its subsidiaries, including Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and recently, Deloitte Financial Advisory Services LLP.
Deloitte recently implemented the Women's Initiative (WIN) which is intended to make Deloitte a firm where "high-performing" women can find careers that are both satisfying and that provide expanding advancement opportunities. Deloitte also claims to have the highest percentage of women directors, partners, and principals among the Big Four accounting firms
History
 | The neutrality of this article is disputed. |
John Ballantine Niven established Touche Niven alongside Haskins & Sells in the Johnston Building at 30 Broad Street in 1900 in New York. At the time, there were fewer than 500 CPAs practicing in the United States, but the new era of income taxes was soon to generate enormous demand for accounting professionals.
In 1913, Niven opened the organization's first branch offices in Minneapolis and Chicago. That same year, the 16th Amendment to the Constitution allowed income tax to be levied on Americans for the first time. Compared with modern levels, the 1913 rate of 1% on taxable incomes over $3,000, rising to 7% on taxable incomes over $500,000, seems low, but, as the Journal of Accountancy noted that year, it was "indubitable that the income tax law is to have a more far-reaching effect upon public accountants than upon any other profession or business in the country.
The Journal was so convinced of the demands that it added a tax column—and asked Niven to be the editor. His column advised accountants on income tax requirements, preparing them for the impact of World War I, when federal spending rose from $742 million in 1916 to $18.9 billion in 1919. By then, income tax provided 58% of federal revenues, and the experts who handled income taxes found their skills in high demand.
After the Crash: Audits and regulations
There were numerous calls for independent auditing in the early decades of the century. But these calls were largely ignored by Washington and Wall Street regulators. The stock market crash of 1929 and the ensuing Depression brought the issue into the public spotlight, especially when it became obvious that proper accounting practices might have prevented some bankruptcies and consequent unemployment.
On April 1, 1933, Colonel Arthur Carter, President of the New York State Society of CPAs, testified before the U.S. Senate Committee on Banking and Currency. Carter helped convince Congress that independent audits should be mandatory for public corporations. The 1933 Securities Act subsequently required public corporations to file independently certified registration statements and periodic reports. A year later, the Securities and Exchange Commission was created to administer the new legislation.
Postwar growth
After World War II, America stood on the brink of historic economic expansion. In this environment, in 1947, Detroit accountant George Bailey, then president of the AICPA, launched his own organization. The new entity enjoyed such a positive start that in less than a year, the partners merged with Touche Niven and A.R. Smart to form Touche, Niven, Bailey & Smart. Headed by Bailey, the organization grew rapidly, in part by creating a dedicated Management Consulting (MC) function. It also forged closer links with organizations established by the cofounder of Touche Niven, George Touche: the Canadian organization Ross, Touche and the British organization George A. Touche. In 1960, the organization was renamed Touche, Ross, Bailey & Smart, becoming Touche Ross in 1969. John William Queenan joined Haskins & Sells in 1936. As managing partner from 1956 until his retirement in 1970, he led the organization through major developments in the profession. Haskins & Sells experienced its own major development by merging with 26 domestic organizations and establishing offices in Canada, Central and South America, Europe, and Japan.
Leading the information revolution
In the 1950s, information technologies became increasingly important and few professions were affected more than accounting. Data processing machines freed accountants to focus on developing and monitoring systems to improve the way clients managed. Characteristically, Touche Ross led the profession. In 1952, it became the first large accounting organization to automate its bookkeeping. Later, Gordon Stubbs wrote Data Processing by Electronics and Introduction to Data Processing, the first two professional brochures of their kind. In 1964, the organization's work with statistical sampling led to the Auditape System, which brought computer technology to audits. The organization's MC group, which provided computer systems advice, felt the greatest impact from the technology revolution. The organization did pioneering work for several leading corporations and for many government agencies. At Touche Ross, the discipline matured during the 1960s and 1970s under the direction of leaders like Robert Trueblood and Michael Chetkovich.
The 1980s: A new style of management
In the 1980s, Deloitte & Touche led the profession through a decade of unprecedented merger and acquisition activity. The organization's proficiency in mergers and acquisitions emerged in the 1970s when a new style of management became prominent in corporate America. The new managers were financially sophisticated and aware of the synergies and economies of scale offered by mergers and acquisitions. They relied on their accountants for more than audit and tax skills, and looked for insightful advice, technological expertise, global operations and support for their merger and acquisition activity.
A new generation of leaders rose to the top of Touche Ross and Deloitte Haskins Sells during these years. In 1982, the two-man team of David Moxley and W. Grant Gregory succeeded Russell Palmer as leaders of Touche Ross. In 1985, Edward A. Kangas, who had made his name in management consulting, was appointed managing partner of Touche Ross. In 1984, J. Michael Cook became managing partner of Deloitte Haskins Sells.
As the rate of mergers and acquisitions accelerated, corporate America became increasingly globalized. Corporations increasingly sought advisers skilled in all areas of accounting and proficient at solving problems throughout the world. Many turned to Deloitte & Touche for just such assistance. To cap off this decade of merger and acquisition activity, Touche Ross and Deloitte Haskins Sells merged in 1989.
The newly formed Deloitte & Touche was led by J. Michael Cook and Edward A. Kangas, who shared the belief that successful accountants of the future would combine strong professional abilities with a deep understanding of their clients’ industries, situations and needs.
Competing for the future
The information revolution and globalization offered the organization larger and more diverse challenges. With the dismantling of the Berlin Wall, the emergence of trading regions such as the European Economic Community, the growing economic power of the Pacific Rim and the growth in cross-border trade through agreements such as NAFTA, the organization's clients demanded increasingly integrated cross-border solutions.
Deloitte & Touche set out to provide the coordinated, global services and solutions that clients required. To do so, the organization needed more than technological sophistication and knowledge of international business. It needed, as managing partner James E. Copeland, Jr., pointed out in 1994, the intellectual equivalent of systems integration—the ability to combine competencies from all functional disciplines across national borders to create solutions for clients.
In 1995, a century after its founding, the partners of Deloitte & Touche voted to create Deloitte Consulting to better serve multinational clients. While the specifics of the world of business have changed in the past 100 years, the overall commitments and goals of the organization remain the same as the day Haskins and Sells shook hands on their partnership, and Touche sent Niven to open an office in New York. As Haskins noted more than 100 years ago, the “study and interest is the soundness of the world of affairs.” Deloitte's goal continues to be to “simplify work so that it can be done more rapidly and more effectively.”
Scandal
In early 2005, the Securities and Exchange Commission announced that it had issued an order finding that Deloitte & Touche LLP had engaged in improper professional conduct and had caused Adelphia's violations of the recordkeeping provisions of the securities laws because it failed to detect the massive fraud perpetrated by Adelphia and certain members of the Rigas family, which controlled Adelphia. The SEC also filed a Federal District court action alleging that Deloitte had failed to implement audit procedures designed to detect Adelphia's illegal actions. Without admitting guilt, Deloitte agreed to pay $50 million to settle the charges. The money from the fine was slated for a bank account set up to compensate the fraud victims.
Mark K. Schonfeld, Director of the SEC's Northeast Regional Office, was quoted in a newspaper article as saying: "What is especially troubling here is that Deloitte recognized the risk of fraud posed by this client at the outset. When auditors turn a blind eye toward misconduct on a high-risk client and allow a fraud of this magnitude to go undetected, the consequences will be severe."
According to the SEC, even though Deloitte had identified Adelphia as one of its highest-risk clients, Deloitte had failed to design an audit appropriately tailored to address audit risk areas that Deloitte had explicitly identified. Specifically, Deloitte issued an audit report containing an unqualified opinion on Adelphia's financial statements for Fiscal Year 2000 while Deloitte knew or should have known that Adelphia: (a) failed to record all debt on its balance sheet or otherwise failed to disclose that it had improperly excluded $1.6 billion in debt from its balance sheet; (b) failed to disclose significant related party transactions; and (c) overstated its stockholders' equity by $375 million. In the federal court complaint, the SEC charged Deloitte with failing to implement audit procedures designed to detect the illegal acts at Adelphia.
Aside from agreeing to the $50 million fine, Deloitte agreed to substantive undertakings designed to address its audit of high-risk clients in the future, including the involvement of Deloitte's forensic accounting specialists in planning high-risk audits, increased training of Deloitte's audit professionals in fraud detection, increased partner involvement in review of audit work papers, and the retention of an independent consultant to review Deloitte's compliance with these undertakings.
Diversity
Deloitte was named one of the "100 Best Companies to Work For" by Fortune magazine and "100 Best Companies for Working Mothers" for 2004 by Working Mother magazine.