As Francine McKenna has said recently:
Why are we pretending that a Big 4 firm is independent and objective when continuing to audit an institution that failed under their watch, one that may be dragging them into litigation, one in which they have failed in their duties to protect the shareholders? And the only experts the government seems to be able to find to clean up the mess that happened on the Big 4's watch are the Big 4?
She's right. As is Prem Sikka, who has said this for years.
And yet look what Accountancy Age reports:
Amyas Morse, a former global managing partner at PricewaterhouseCoopers, has been appointed Comptroller and Auditor General at the National Audit Office
I'm sure he's an OK guy. But is it really true that the Big 4 are the answer to everything.
My answer is that they quite emphatically are not.
They designed the accounting and auditing systems that got us into our current mess with the quite deliberate intent of facilitating financial market expansion at cost to society at large and with intent to limit their own liability and responsibility for the consequences. Sorry, but that disqualifies them form influence right now in my opinion.
If we are going to get out of this mess we have to rethink just what we want. And there's no sign we're doing that as yet. That's what worries me most of all.
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when I were a lad there were 3 auditing standards, and two of those were about audit reports. Now they drown in a tidal wave of guff – so I agree completely with you about that bit – even though I doubt you can blame it all on the big 4. But the real problem with the big 4 is that they have a monopoly position. The other good thing about when I were a lad was that the big 4 was the big 20. there was real competition. Economics (I know you hate that word) tells us that monopoly is a bad thing. It should be broken up.
Richard
I find myself almost agreeing with you twice on one day!
The problem isn’t really the making of the big 4, as alistair points out, too much guff these days and box ticking exercises combined with much too little common sense.
I would be in favour of breaking the big 4 up and creating audit only firms completely unconnected with the previous business. I would not let them do any form of consultancy or tax work.
I would also recommend rotation of auditors, say every three years. As an auditor, nothing would focus the mind more than knowing your work was being checked the following year!
The Domestic Disciplines on Accountancy in the General Agreement on Trade in Services (GATS), will, if/when the Round is finalised, undoubtedly strengthen the position of the Big 4.
They are already of a size that makes them practically untouchable, depite their obvious role in the financial crisis. Their business is in fact increasing as private companies and governments go to them for advice.
If we are considering a corporate-run world, which is the trajectory of the neoliberal agenda (an agenda NOT abandoned, especially in UK), then the Big 4 are pretty central to that.