The City great and good are to review the workings of the Big 4 accountants. As Sky has reported:
Some of the City's leading figures are being drafted in to aid a Government-commissioned probe of the audit regulator, days after a scathing parliamentary report castigated it over the collapse of Carillion, the construction group.
Sky News has learnt that Sir Peter Gershon, the National Grid chairman, Anne Richards, the boss of M&G Investments, and Nikhil Rathi, the London Stock Exchange chief executive, are among roughly a dozen panellists who will assist Sir John Kingman, the former Treasury mandarin who is leading the inquiry.
The review was ordered by Greg Clark, the Business Secretary, amid growing criticism of the FRC's scrutiny of audit firms and their clients.
Sources said the panel working on Sir John's review would be announced by Mr Clark's department on Friday.
Its other members are Lucinda Bell, former chief financial officer of British Land and now chair of the audit committee at Rotork; Mark Burgess, a senior fund manager at Colombia Threadneedle; Sir John Cridland, former director-general of the CBI; Dame Amelia Fawcett, a non-executive director at the Treasury; Amelia Fletcher, professor of competition policy at the University of East Anglia and a non-executive director at the Competition and Markets Authority; Simon Fraser, who chairs the Investor Forum; Teresa Graham of Salix Finance and the HMRC administrative burdens advisory board; and Dame Mary Keegan, former chair of the Accounting Standards Board and PricewaterhouseCoopers' first female audit partner.
Let's just look at who is missing.
First, an employee or union representative.
Second, a small business representative.
Third, an obvious pension representative in the sense of actually being an end user investor rather than being an intermediate manager.
Fourth, little sign of any attempt to reflect our diverse society.
And fifth, any accounting academic.
Instead, we have a Treasury insider who sang the praises of the FRC when in that role not very long ago being assisted by a range of people who are either already regulators when regulation has failed, or have considerable experience of being the very directors whose best interests have been well served by the existence of supine auditors or who are from the funds industry that has long had the chance to use its voting power to change the current failings but never has. PWC even get a look in.
All they managed is a good gender mix. That's useful, but not enough.
I am expecting a whitewash, or an exercise in irrelevance, or both.
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Well, if cyncism is in order, lets ask cynical questions:
Who nominated these panelists? A named person and a named organisation did this: we now know something about who tgey represent, and their agenda.
Who gains? Obviously, everyone benefiting from the status quo; but we might get a more specific lead, here.
What is the worst that can happen?
…And who would regard each of these ‘worst’ outcomes as a success?
Thought you would be pleased there are no big 4 on the panel
There are: Mary Keegan is Big 4 to her core
The establishment draw their wagons into a tight circle.
The inquiry parameters will be drawn up in such a way as to preclude any discussion of necessary radical reforms, except in so far as it protects the interests represented on this panel.
Whitewash ? I’d probably call it a stitch-up.
No mention of a target duration or reporting date.
I expect all the members to conduct themselves objectively, independently, for proper purposes, exercising proper professional judgement.
Is there anyone on that list who will not do so?
The Big 4 would claim they did that
Where did it get us?
Define ‘proper’? I suspect this group will define it as ‘supporting the opinion of the status quo’
Do we know if the TOR extend beyond Dover?
Back in PM Wilson’s day inquiries were set up to look at legal professions and the City Institutions but they declined to put a toe in the dangerous “off shore” waters.
Since then of course much of the Big 4 influence is world-wide operating from any rock that is large enough to hoist a British flag on a pole and we all remember the Jersey “limited liability” scandal…
There is a fundamental problem about the way auditors are appointed which must be addressed. In theory it’s the shareholders who make the appointment but in reality it’s the executive directors. The Big 4 know this which is why they rarely challenge the Board.
Secondly, the ASB has made most reports and accounts from large companies indecipherable to the layman. Pages of meaningless notes whereas what is requires is an independent, objective statement about far more important matters: strategy, employee engagement, responsibility, etc.
Thirdly executive bonuses linked to share price increases should be banned as they encourage poor capital structures by incentivising management to raise debt rather than equity.
No-one on this Committee is going to vote for these things because they all benefit from them. This is nothing more than an attempt by Government to say we had a review and everything’s ok. Shocking and unacceptable.
I have been a chartered accountant for 40 years; I never expected to be embarrassed by the leaders of my profession. Fortunately most accountants outside the big 10 (not just the 4) do a good job but we don’t have the time or energy to change the status quo.
I agree with your observations
A revolt of the masses of chartered accountants is required
“A revolt of the masses of chartered accountants is required”
Sounds like a case of ‘if you can’t beat ’em, join ’em’
The Big Four are revolting already 🙂
It’s not just the Big 4 with which we need be concerned, see –
http://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06461.html
Whilst I accept that taxpayers are entitled to defend themselves, to the fullest extent (and after all that is what the tribunal system and the courts are ultimately there for), against enquiries made by HMRC, this looks like a clear case of “my client right or wrong” for the large firm of chartered accountants involved.
[…] Second, the move is necessary: the government appointed investigation looks like a whitewash from the outset, as I have already suggested. […]