The Times has reported this morning that:
A watchdog review into the audit market risks forcing one of the Big Four accounting firms to withdraw from auditing Britain's largest companies if it forces changes too quickly, the industry's body has warned.
The Institute of Chartered Accountants in England and Wales advised the Competition and Markets Authority to take a “graduated approach” to introducing reforms designed to increase choice.
It said that this would “mitigate the possibility of causing one or more of the Big Four to withdraw from the market or significantly reduce their commitment to it”.
I have to take exception to this as a member of the Institute of Chartered Accountants in England and Wales, which is also a regulator. If a member firm wants to quit a market it is not the ICAEW's job to defend that firm's commercial interests. Its job is to act in the public interest. And if there is no market-based solution to auditing in the future, so be it. The ICAEW should recognise that and not seek to support the unsustainable retention of a private monopoly that has not met the public interest test, but has secured significant wealth for a few.
If the ICAEW is to do its job properly it should not be issuing fairly unsubtle threats. But that is what it seems to be doing to me. And I do not approve, as a member.
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Presumably they are worried about the loss of exam fee income if the big 4 pull out
I reluctantly feel that the only answer to the current audit crisis is to let a public sector body such as the Audit Commission deal with all quoted public company audits.
I tend to agree now
I agree, this is an unacceptable way to spend my hard-earned subscription and just shows that the ICAEW is subject to the influence of the big firms. I shall write to Michael Izza and tell him so.
In fact it would be a good thing if one of the big-4 firms did withdraw from the audit market; it would shake it up and allow the second tier to gain more of a foothold (which is why none of the big-4 will take the risk).
The only viable solution to the current debacle, however, is to nationalise auditing (and insolvency) and then make the accounting firms compete on a level playing field for their lucrative consulting services. They’ve nearly run out of feet to shoot themselves in so lets hope it’ll happen soon.
Agree with all of that
We have debated this before. No one of any quality will join a national audit practise if they are subject to civil service type salaries. A senior manager in the big 4 is on 75-80k. It’s simply not going to work. Those who are good will move to internal audit teams or risk assurance or any of the numerous other assurance businesses in the big 4. The national auditor will be staffed by low quality individuals. And there will be no one to fine when things go wrong
Mike
The state has no problem paying such salaries
You really need to stop spouting nonsense
Richard
For someone who used to work in practice I’m amazed you can’t see the obvious issues with a national auditor. Maximum treasury civil service pay is 208k or a director pay in a big 4. No carrot of progression or a pay rise as that’s the cap. Who on earth would join that organisation doing a thankless task for that?
Those in the big 4 don’t tend to have an attitude of “public service” before you reply that for some people money isn’t everything.
If you think good people are unavailable for £208,000 I suggest you have lost complete touch with reality
And I entirely agree with you about the Big 4
But that is exactly why they are not suited to have the state monopoly granted to them supposedly in the puybluc interest, which they have subverted
You really ought to learn some logic Mike
That thinking is well out of date; Government is well able to recruit and pay for suitably qualified individuals as it does in many other sectors. It’s the fees paid by companies that will fund salaries and these fees don’t need to change.
It is quite possible to have high quality public services if they are properly financed.