We are all reborn, who wants to be the richest man?

Chapter 635 Audit and Consulting

How can a consortium not have its own accounting firm?
And it is inevitable for a family that aspires to become a ruling family like the Luo family to own a world-renowned accounting firm.

Why didn't the Big Four, now the Big Five, go public? Are they really talking about corporate attributes that are not suitable for going public?

The most crucial reason is that listing requires the disclosure of various information, which these institutions cannot do at all.

"You won the bet again. Sometimes I really doubt whether you are a prophet. Why do you seem to know everything in advance?"

"What do you mean? Why are you saying that suddenly?"

Luo Anran is now in the second semester of his first year in junior high school. Although unlike Rabbit's school, where the earliest he gets out of school is around five o'clock, his schedule is not as relaxed as it was in elementary school.

Secondary schools and primary schools in Hong Kong Island are similar, with school still ending at 3:30 to 4:00 p.m.

However, unlike elementary school, teachers will recommend a lot of interest classes and activities, so it is basically time for dinner when I get home every day.

Today, Luo Anran came back early with great difficulty, and her father Luo Nianzhong accompanied her in exercising for a rare occasion.

Just after taking a bath and playing with Luo Jingyi, the four-year-old child of Luo Laosi, for a while, Chris came over and said something that left Luo Nianzhong confused.

"Enron, the Chris Fund suspected that Enron was likely to have committed financial fraud. Did you know that this would happen when you and the Texas consortium wanted shares in Houston Natural Gas?"

When cooperating with the Texas consortium and the DuPont family, Luo Nianzhong asked for 8.3% of the shares of Houston Natural Gas Company, which surprised everyone.

This was beyond everyone's expectations at the time, because at that time Houston Gas Company was just a medium-sized natural gas pipeline management company in Texas.

Who would have thought that it would later be merged into Northern Natural Gas Company, and that it would perform so well over the years, with its business more than doubling, involving stores, investments, energy, energy exploration and other fields, becoming one of the largest energy companies in the United States.

"How would I know, it's just a coincidence."

Luo Nianzhong would never tell Chris that this was his purpose.

"You said that Enron might have committed financial fraud? What exactly happened?"

"Levi told me that Enron's CFO Andrew used a new accounting method and began to prepare financial statements based on market value."

The price is recorded according to the market value. An industrial enterprise has started to engage in finance.

What is market value pricing? Simply put, if I sign a ten-year contract this year, I agree to supply natural gas to a company for ten years.

Normally, the profit of this business is calculated annually because no one knows what the natural gas price will be each year.

But it is different if the price is recorded according to market value. It multiplies this year's profit by 10, which means that the profit of this order for ten years is put into this year. Do you think the financial statements can be bad?

Generally speaking, there is nothing wrong with this way of recording prices, but there needs to be a prerequisite, that is, the value of the contract is recognized by everyone.

The financial industry uses this accounting method because the long orders in the financial industry, such as consulting, are fixed and have large models, so the difference will not be too big after calculation.

But the real industry is different. No one knows what prices will be like next year if the weather gets hot. To put it bluntly, Enron says the contract is worth whatever it says it is worth. How could it possibly make everyone agree with that?

“The SEC agreed?”

SEC is the Securities and Exchange Commission. Without their consent, you cannot change the pricing method at will.

"They agreed because Enron's market makers were a bit like financial products. Enron said they needed to use market value pricing, and then the SEC agreed."

"It seems that this is what everyone wants to see."

Can market value be recorded if there is a market maker? What nonsense! Which large industrial company doesn't have it? Let's see if they can get approval when they apply.

"In that case, let's help them and tell Levi that we can bring Enron to the Internet." "What do you want to do?"

The current development speed of the Internet is contrary to common sense. No one knows when this bomb will explode. Once it reaches the Internet field, it is likely to explode with the collapse of the Internet.

"I don't want to do anything, I just think this is a once-in-a-lifetime opportunity."

Luo Nianzhong smiled. Peace? That was never his goal. He had acquired the shares of Houston Natural Gas Company not for this company, or to get into the Luo family system.

"Ask someone to contact AXA Consulting and tell them we are interested in cooperating."

"Your target is Andersen?" Chris exclaimed.

Later generations only know about the Big Four accounting firms, but in fact there were originally five, and the missing one was Arthur Andersen.

Moreover, Andersen is now the giant among auditing firms, and the other Big Four are all shrouded in its shadow.

PricewaterhouseCoopers was able to develop into the largest accounting firm because it acquired Andersen's business in Asia.

As for AXA, more people may have heard of it if it had a different name, Accenture, which later became the world's largest management consulting company and one of the Fortune 500.

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In 1953, Andersen installed the first commercial computer in the United States to help General Electric improve its payroll processing efficiency, thus ushering in the era of data processing.

This project marked the beginning of Andersen's consulting business, which quickly grew based on GE's model solution.

However, as the profits of the consulting business exceeded those of the auditing business in the 80s, the staff of the consulting department were no longer satisfied with relying on Andersen for blood transfusions, and had been clamoring to split up and operate independently.

In 1989, AXA finally got what it wanted and split Andersen into Andersen, which mainly engaged in auditing business, and AXA Consulting, which mainly engaged in consulting business.

However, in the past two years, AXA's partners have started to make trouble again, because in order to split Andersen, Andersen Global Partners was established in Switzerland, and both companies are under its jurisdiction.

It can be said that AXA is finally no longer a subsidiary of Andersen, but it has turned into a subsidiary of someone else.

Andersen Global's interference in AXA's affairs has increasingly exposed the conflict between the two parties. The reason is that AXA refuses to provide services to small and medium-sized enterprises and only focuses on serving large enterprises and potential enterprises.

Andersen Global believes that no matter how small a fly is, it is still meat, and it is still profitable even if the cost-benefit ratio is not high, so there is no reason not to make money.

It is impossible to take over Andersen now, but Luo Nianzhong does have a chance to take over the consulting company AXA.

The first is the Enron incident. If the people from the Chris Foundation really want to investigate, they will definitely find something. However, this will be disadvantageous to Luo Nianzhong, Andersen, and Enron. However, this can become a condition.

Another thing is the audit work of the Far East Group. Except for the Far East Group’s own accounting firm, most of the audit work of the Far East Group was handed over to other accounting firms ranked among the top ten in the world, but Andersen was not among them.

As the world's largest accounting firm, it does not have the business of the world's largest companies. This has always been the reason why Andersen was ridiculed by its peers in the industry. Many people even said that Andersen had sinned against the tycoon before he became rich.

After Enron Natural Gas was established, because one of the shareholders was the Chris Fund, Andersen often asked the other party for the reason.

My attitude was sincere, and I said, "If there are mistakes, can't I correct them?" But it was of no avail. It was like a thorn in Andersen's throat.

And the last point is that now AXA only wants to break away from its parent company and become independent. In this regard, Luo Nianzhong can give Andersen a satisfactory price.

As long as AXA is acquired and Far Eastern Bank's consulting business throughout Southeast Asia is integrated, AXA will become the world's largest consulting company ahead of schedule.

As for Andersen, when Enron collapsed, it was the time for the Luo family to acquire Andersen's audit business.

It seems that the move made at the beginning will soon bear fruit.

(End of this chapter)