Accoring to The Times:
The heads of Deloitte, KPMG, EY and PWC have written to the Commons business committee to say the competition watchdog should postpone moves to overhaul the audit market until the completion of a separate review by Donald Brydon, chairman of the London Stock Exchange, which could take another 12 months.
I admit that this reminds me of St Augustine's prayer that he be celibate, but not yet.
So what are the Big 4 frightened of? Two things.
First, joint audit, although these are quite common in France, Germany and Denmark, for example. In other words, they know how they work. They just do not want to make them work.
And, secondly, not being able to sell consultancy services. That's because if the mid-tier accountancy firms are not willing or able to do joint audit (and so, more importantly, accept joint risk) with the Big 4 firms then the Big 4 will have to work with each other on those audits. And to create any market choice that means they will be forced to split and sell their consultancy services separately from their audit services.
The letter can then be seen as a cry of financial pain. The cross subsidies that keep this market going now will disappear and the auditors fear they will not make £700,000 a year ticking boxes, which is what they have reduced the audit function to since it became an exercise in confirming rule compliance rather than expressing opinion.
Well, maybe that fear is well placed.
But frankly, I doubt it: given that the statutory monopoly will remain under the CMA plans the simple fact is the price will go up and it will be doubles all round. If these firms can't make money out of a monopoly it would be worrying.
Either way that our supposed top management consultants can't imagine surviving a process of change should be eye-opening.
And it says a great deal about the quality of the advice that they must provide to their clients.
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We will soon be in the 2020’s and time that ever rolling stream etc. The big four are becoming as out of date as the old British Empire, and its financial arrangements. It took a long time for those concerned in The City to admit that time was up and when they did The City had almost gone bust. Here we go again.
Very true and incisive. Sadly, the Big 4 have huge experience of kicking things into the long grass and delaying or removing regulations from taking effect. And you are so right to point out that their work is all about money now and not ethics, integrity or independence.
This looks to be interesting, potentially huge. What do think?
“KPMG and Deloitte under investigation for role in 1MDB corruption scandal”
http://www.cityam.com/272246/kpmg-and-deloitte-under-investigation-role-1mdb-corruption
Surprise, surprise
But remember, they’ll deny this has anything to do with the worldwide firms
Because that is what they do when things go wrong
The gravy train is slowing down and audit firms will procrastinate and delay as long as possible. The vast earnings of their partners are no longer sustainable and they know it. When the Big-4 took control of the so-called standard setting process and turned standards and judgement into rules to be followed blindly they started the process that will lead to their demise. Tick boxing became their new sport, reduced their risk and maintained (for now) their earnings.
Change will have to happen but it’ll take years as they are adept at slowing down the process which their friends in government (who are often awarded highly paid consultancy jobs with the Big-4 when they leave Westminster) will help them with.
Only a radical change to a nationalised audit service of our large businesses and banks will suffice. I won’t hold my breath.
I wholeheartedly agree with the need for radical reform