Competition watchdog unveils audit shake-up

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Robert Lovell
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Large listed companies should put their audits out to tender every five years, according to the Competition Commission, which has this morning unveiled its plans to encourage greater rivalry between accountancy firms.

The latest report is a major milestone in a 21-month probe that was set in train by a critical report from the House of Lords economic affairs committee back in 2011. 

The commission has put forward a set of provisional measures...

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23rd Jul 2013 15:01

Icas director questions watchdog’s plans

The Institute of Chartered Accountants of Scotland (Icas) broadly welcomed the Competition Commission's proposals.

However its director of technical policy, James Barbour, was unsure if it would create a net improvement.

“Some stakeholders will be unsure about the merits of reducing the mandatory retendering period from 10 to five years.

They may question whether the benefits from this proposed change will outweigh the additional costs to be incurred.”

“This proposal has potential cost and resource implications for the FRC. How is this to be resourced?” Barbour asked.

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By DMGbus
24th Jul 2013 13:39

The "cosy cosy" signature selling scenario

According to the findings the lack of effective competition encouraged corporate auditors to focus more on the interests of the managers who appoint them than the shareholders they are supposed to serve.  " "

This is precisely the big issue.

A too cosy relationship between auditors and those who have the most opportunity to commit fraud.

About time it is brought to an end.  A serious cultural change is needed in this respect.

There might be a risk that some auditors consider that their job is to "sell their signature" to what the directors want published.

There might even also be (might have been in the past) auditors who will please directors by rubbishing whilsteblowers legitmate claims about reckless lending in the banking industry.  A misguided idea that public confidence in the bank outweighs public exposure of risks (directors really were well pleased at this, but not shareholders who ultimately paid the price). (**)

(auditors working to please management rather than look after the interests shareholders) (he who pays the piper)

(he who pays = management)

(piper = auditor)

(selling a signature)

(**) a cultural aspect of modern society - maybe I have mis-heard or misinterpreted stories about Hospital inspectors considering that their job was to gloss over / cover up hospital deaths to please management ("piper please don't rock the boat"), resulting in prolonged issues of excessive mortality rates?   Deficient auditing of quality as opposed to deficient auditing of figures.   Both scenarios (if true) would represent corruption in execution - conspiracy to conceal important facts if it really were true.  One scenario (if true) should have lead to Corporate Manslaughter charges, the other scenario (if true) should have resulted in bad auditors paying compensation to shareholders and UK government for losses caused by their deficient work.

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24th Jul 2013 15:02

Planet GaGa


 My kids tell me that because I am an accountant, I live on a different planet. I think the Competition Commission are the extra terrestrial aliens.

 The reality on the ground is- so far as "Big audits" are concerned;-

 1) 90% of finance directors have to be dragged screaming to the cheque-book in order to pay the "Audit fee".

 2) There is a constant vicious  battle between the "Big" firms to snatch[***] business from each other. Sometimes it gets nasty. (based on comments from KPMG and or Deloittes staff members known to me)

 3) On any audit of substance, never mind a "Big Audit" it may take two or three years to make a profit from the fees because of the time needed just to get to know the client.

 4) More audit "Mistakes" happen because of pressure on the fee /profit ratio, than anything else.

 5) Hundreds of us have relinquished  audit certification because we have opined that we (The seed corn that might have grown into larger audit firms) do not believe that audit work is worth the effort.   The Competition Commission might do better to look into the reasons for this.


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24th Jul 2013 15:39

Oi! Mr DMG


 DMG stop it!


 The fact is there are a five figure number of  PLC companies.

 The statistics are that 99.99% behave themselves. I think that the low number of "Problems" each year is a tribute to the general honesty of people.

 In the 52 years I have been in the profession I believe that I have only come across three genuine crooks, and maybe a handful of idiots. The rest I am pleased to say regarded their qualification as hard earned, and not to be compromised for anyone.

 If you live in a world where you perceive everyone round you (Except you) is a "Del Boy" then I am sorry for you, you speak as if you have had an unhappy and or deprived upbringing. That comment is based on thirty years' experience as a youth leader.

I was taught that it is sensible to take precautions against improper behaviour, but at the same time to accept people as trying their best to do their job, unless actually individually proven otherwise.





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