RSM axes top executives after accounting error
Mid-tier accountancy firm RSM has overhauled its executive team after misstating its accounts by nearly £10m over two years.
RSM's Chief executive David Gwilliam, chief finance officer Nigel Tristem and chief operating officer Robert Ross have lost their executive roles in the aftermath of an accounting blunder, the likes of which have not been associated with the RSM name since the dying days of Tenon.
This week, a footnote in the firm's accounts which admitted an error in its provisions for professional liability claims in 2018 spelled the end for the executives, despite the trio overseeing a 6.7% increase in revenues to £335m.
The error resulted in RSM earmarking £3.8m too much for the 2017 claims and £6m too little for 2018, denting the firm's net profit to the tune of £2.2m.
The executives were shown the door in December 2019, with their replacements already lined up in an acting capacity.
The firm’s managing partner Jez Filley has taken on the acting chief executive position, while Andrew Westbrook has become acting CFO and Jill Jones the acting COO.
The axed execs remain at the firm as partners, but this should do little to soften the blow for former chief exec Gwilliam, who was in the role less than two years and former CFO Tristem, who has been with the firm for almost 40 years.
An RSM spokesperson confirmed that the board made these management changes “by way of response to these issues”.
RSM in 'strong financial health'
The spokesperson continued: “RSM remains in very strong financial health, well placed to capitalise on all the opportunities available to it in the market, and to grow on its success of recent years.”
Indeed, RSM UK Holdings reported a pre-tax profit of £9.1m, compared to a loss of £113,000 the previous year, with revenues up £21m on last year’s £314m.
But the accounting error tarnishes what has been a notable year for RSM, which culminated in the firm winning its first FTSE 350 index audit client in the retailer Sports Direct.
Of course, when RSM and accounting errors are said in the same breath, memories naturally harken back to 2013 and the collapse of RSM Tenon. The crisis-hit Tenon discovered errors in 2012 which auditor PwC failed to uncover, which subsequently led to the firm’s profits crashing from £7.3m to £683,000 and then entering administration.
For accounting academic and critic of the audit sector Prem Sikka though, the fact RSM took a year to discover a significant error does the accountancy profession no favours. “Imagine relying on accounting firms to audit accounts of companies,” he said.
For Sikka, the problems lie with the “toothless regulators”.
“Even if they prepare lousy accounts and a lousy audit they continue in business because the regulators are pretty toothless and the state has guaranteed a market of external audit to accountants belonging to comparatively few trade associations so that means they remain in business,” he said.
“People increasingly become sceptical and it is a drip-drip effect and this is another drip which says that this industry is not what it claims to be. There is a lack of integrity, technical know-how, ethics, responsibility, liability and eventually, these drips leave their marks on stones and they will one day have a cumulative effect on the whole future of this industry.”