I posted this Tweet this morning:
Audit, accounting and economic crises? What crises? Life carries on as normal for the accounting elite as they extract excess profits from their clients, their staff and society at large https://t.co/0kw0Jc6a9C
— Richard Murphy (@RichardJMurphy) September 30, 2022
To pretend that anything like this level of reward can be justified by the people who run these firms is impossible. This is what oligopoly power looks like, and it is screwing us all.
I apologise that the language has to be so forthright, but for a failing profession, as audit and accountancy is, this is unacceptable.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
I note it says it is a share of profits and not a salary, so does that mean it is taxed at the much lower dividend rate and with no NI?
No, this is an LLp so all at income tax rates
Having the experience of using many of the big name firms over the years for audited annual results, tax advice, etc., I wholly concur with your views Richard. It is not justifiable in any sane universe. Because audit is mandated (for organisations above a certain size), they charged huge sums, added little value and took no responsibility for their findings. Enron is a classic case.
I would suggest that the salaries earned in the financial (or should it be farcical) and investment banking sector are wholly unjustified as well. Similarly, the earnings of many senior executives. A multiplier for top earner salaries needs to be applied relative to the average salary in the business (including taking account of using offshored (i.e., cheap) labour).
Whether the multiplier is 5, 10 or something else can be debated. But in principle it should be applied. As a simple example lets say the average worker works 40 hours a week and the average high-earner in the company works, say, 60 hours (certainly this or higher has been typical in my experience). This only gives a multiplier of 1.5. Of course, you then need to factor in the relative skills, e.g., a labourer or a neurosurgeon. Again as a simple example, the senior executive has a degree in engineering similar to many in the workforce. How could you possibly allow a multiple of even 5 to exist (relative to similarly qualified colleagues)…are we saying they are 5 times better or work 5 times as many hours? This is clearly not the case. I feel these ridiculously high salaries are even more abhorrent in the financial sector (audit firms, city traders, investment banking, etc.).
We need to address the ridiculous salaries earned by some with an aim to more fairly spread the earnings of the organisation to those who are usually in the frontline of the enterprise. I think it was in 2016 Bob Dudley (then CEO of BP) had a 20% increase in earnings to c.$19.6m despite having axed thousands of jobs (as part of cost-cutting measures) and presiding over a $6.5bn deficit in 2015. How can this make sense?
The financial (wealth extracting) sector needs to be in the service of the productive (wealth creating) sector and it in turn in the service of society at large and the planet. We need to more fairly distribute wealth and I think it would be better to do this by addressing relative earnings rather than trying to recoup via taxes (but by all means have taxes in place to ensure extraordinary earnings attract extraordinary taxes).
These highly paid failures, who have been around for years, just keep on getting away with it. It belies the notion that the pie has to keep growing. These bastards would just take a bigger slice, no matter how big the pie.
I did my MBA in 2014 and the module I did the worst in was Finance & Accounting.
I got a C- in it because all I saw was a load of standards and problems that were meant to be addressed but were not actually addressed in practice.
It seemed that most corporate accounting works like a Russian doll – the headline figures don’t mean what they say – you have to look at the underlying assumptions behind them – open up doll after doll to get to the truth. And even after that you’re maybe still not certain. In my view, you’ll never get a straight answer from an accountant.
My F & A lecturer was a perfectly decent bloke, but we did not see eye to eye at all. The rest of the course was robust and enjoyable. But F & A remains an enigma to me to this day. I just don’t trust it at all.
If I was the CEO of a company or had a company of my own, F&A would be the section I would be most diligent about. Diligent verging on sceptism.
There is no number in most accounts that should be taken at face value apart from, perhaps, the date to which they are prepared
Even cash is subjective in large company accounts