It was only a matter of time before the big guns were lined up on the leaders of our profession. The failure of Carillion might be the most damaging event for the upper echelons of the accountancy industry since the failures of Enron and Lehman Brothers led to the disappearance of Arthur Andersen, writes AccountingWEB's anonymous columnist.
As so often in recent years, it is a government committee that is causing all of this anguish. In fact, two have teamed up, the Business, Energy and Industrial Strategy (BEIS) and Work and Pension Committees, to launch a scathing attack on KPMG as external auditor, Deloitte as internal auditor, EY on the recovery side and PwC as adviser. As we can all see, rather embarrassingly nobody escapes the scrutiny and opprobrium.
Frankly, failing to spot that a company was billions of pounds in debt with no hope of recovery in what has been described by the MPs as a “story of recklessness, hubris and greed” does nothing for the image of a profession that should surely have done better in this case and, I would argue, many others on a smaller scale.
I fear that the consequences for the four largest firms in the world could be very damaging, while the reputation of the profession is also in the limelight, yet again. The report has recommended that the government should refer the statutory audit market to the competition regulator. It has gone further and suggested that the regulator should also consider breaking up the Big Four accountancy firms.
Presumably, the intention would be that there should be a greater divide between auditing and the provision of advisory services. It has also been suggested that the payment of auditors by their clients is inappropriate, threatening independence and creating the risk that audits would not be carried out as diligently as they should. Many of us might recognise and even accept the dangers that come from client pressure in the audit field as a result.
My guess is that none of this will come as that much of a surprise to readers and many may be delighted at the prospect of seeing work move from the major firms to those further down the pecking order, giving all of us a chance to get some juicy, incredibly lucrative projects in the future.
Is anyone going to shed tears if partners in Big Four firms find their profit shares diminishing? It seems likely that nobody other than those partners and their families will be put out if such an eventuality comes to pass.
The real concern might be whether a breakup is good for the profession more widely. While it seems unlikely that many of us look kindly on what can sometimes seem like a cosy cartel, if smaller firms begin to take on major projects for corporate giants, there has to be a risk that some will go beyond their levels of expertise, leading to even worse consequences. In addition, there will be even less willing to withstand pressure from clients who pay exorbitant fees.
This story will run and run, but at the moment I’m not sure I really want to boast about being an accountant.
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.