I listened to local government minister Bob Neill on the Today programme this morning claiming that abolishing the Audit Commission would save cost because of the competition this would introduce into the local authority audit market.
The man is talking complete nonsense. The “competition” will come from the Big 4.
Companies and major accountancy firms are increasingly willing to increase their profits through indulgence in price fixing, tax avoidance/evasion, bribery, corruption, money laundering and practices that show scant regard for social norms and even laws.
Are these the people to engage in such “competition”?
And when a major part of the role of these auditors is to address both efficiency and corruption do we really want firms who have all been either fined or investigated for abusive practices such as assisting tax evasion to be engaged in this market?
I don’t.
I can’t see why anyone else would.
And i don’t believe they’ll save us a penny.
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I have never found that the efficiencies derived from ‘competition’ ever seem to outweigh the profit margin that replaces it.
Why is it whenever this argument is put forth they only put forward part of the equation Cost – inefficiencies = lower cost. No its Cost – inefficiencies + profit margin = ???
Given that most accountancy firms base their profit structure on 1/3 employee cost, 1/3 admin costs and 1/3 profit ( directors/partners salaries + profit), one would have to conclude that somehow the large accountancy firms are going to improve efficiencies on the audit commission by over 1/3
Have the various politicians actually got some quotes (informed and relatively binding quotes) to back up their assertion or are they just blindly assuming that the private sector will be cheaper?
I’m looking forward to the point where its not cheaper and all parties involved will come forward to state that whilst more expensive, it is better ‘value’ ignoring the fact that the whole idea in the first place was to reduce costs as we simply didn’t have the money.
There is no way the big firms will ‘compete’ – there are rich pickings for all here. They behave (because they are) like an oligarchy (or another word for this might be ‘cartel’!)
Perhaps part of the engagement terms that the government should have in place in order for these firms to be part of the governments perfered supplier list is a standard of tax ethics that applies to the whole firm – ie “you want to do government audit commission work? Well you have to agree to stop helping your other clients avoid/ evade tax” – now that would be a good move by the government (except that I suspect that the big firms would simply not pitch for the work in the first place)
Sadly the Big Four’s position is so dominant that there is little competition at all- I believe the Big Four audit over 95% of FTSE 250 companies. It’s a scandal such an important profession became dominated by so few firms.
[…] made a total hash of it. Even Ritchie thought he was talking complete nonsense. His argument was that the Audit Commission spends lots on […]
Of course the Big 4 compete, but I would have theought that local authority audits would also go to the next lower tier of firms, unless BDO Grant Tilly Smith Moores Horwath Kingston Mazars have all merged into one.