The disagreement over the accounting treatment of the $12.5 million between Livent and Deloitte was the reason for hiring EY and PriceWaterhouseCoopers. Such disagreements usually lead to the withdrawal of an auditing firm. Alternatively, they can modify the opinion which is a wrong measure as it violates compliance with GAAP rules where companies are required to give honest opinions given the data they have. To clarify the disagreement, it was feasible for Deloitte to engage competing firms to ensure the Livent was making the best move.
Accounting and auditing field is composed of different competing firms each with different methods of operations. Importantly, the AICPA code of professional conduct requires that all the firms practice professional competence and professional care. These companies are required to follow due diligence in any tasks they perform. In this case, competing firms will be required to maintain professionalism at levels where customers and employers receive professional services that are based on professional standards. Therefore, it is highly unlikely that a competing firm would give false opinions out of malice.
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It was a wise decision for Deloitte to engage public competing firms to solve the resulting disagreement. However, different competing firms have different verticals along which they perform their assessment. In other terms, different auditing firms set standards which are obliged to offer competent services to clients. Therefore, in different and complicated business transactions, there are chances that they will give conflicting opinions. Owing to this fact, hiring public competing firms like PriceWaterhouseCoopers and EY was not sufficient enough in making the right decisions. Even though Livent was eventually declared bankrupt, it does not mean that the public competitors did not meet the due professional care standards. Rather, different opinions were given based on internal standards and procedures as levels of management checking in decision making are different.
