What happens when you are outwitted by the opposition?
February 27th, 2019
“Leeds United’s movement and intensity caught us by surprise”. (Older quote..!)
Speechless Stoke City fans were open-mouthed in astonishment as manager Gary Rowett gave his post-match television interview. The Potters had just lost their opening Championship game at Leeds and they were being told it was because they weren’t quick enough or committed enough for this division. By a manager who had spent many years managing…Championship clubs.
“What did he think was going to happen?”, I told my Stoke City supporting friends: “Based on that interview, he won’t last long”.
A similar reaction was observed from MPs when representatives from the Big Four were speaking at the Business, Energy and Industrial Strategy (BEIS) Committee’s inquiry into the future of audit in the UK (here).
The inquiry had been called after numerous high-profile corporate collapses had followed apparently cheery, business-as-usual audits by some of the UK’s largest accountancy brands. The audits had clearly not been the most reliable indicators of corporate viability and some of the details – in the Carillion and Patisserie Valerie cases in particular – have been excruciatingly embarrassing for our nation’s most notable number crunchers.
Not to worry, though! The Big Four have all committed to no longer performing non-audit work for FTSE350 clients, they told the enquiry. So – that would improve audit quality would it? Err, no, it wouldn’t, they admitted. But the Big Four had other whizzy ideas, such as spinning audit businesses into separate companies! Ah, great, smiled the MPs – so would that improve audit quality? Err, actually, no, we don’t think it will, mumbled the accountants, no doubt staring down at their expensive shoes as they did so.
What about all these corporate failures following hard on the heels of the audit? And what about the frauds? Well actually, said the guy from KPMG, we carried out a proper audit on Carillion. And as for what appears to be a massive fraud at Patisserie Valerie, Mr Grant Thornton, who had been auditing those accounts, had an explanation for that, too. “An auditor is not looking for fraud”, he said, no doubt appalled by the very idea.
Unfortunately for Stoke City and some accountants, there are clever people out there who are out to gain an advantage, whether it is by counter-attacking on the break or corporate sleight-of-hand involving the covert movement of funds
Well, we know what happened at Stoke City. The hapless Gary Rowett was gone within six months of that interview. And KPMG have, at least, suspended four members of staff, including the lead partner on that Carillion audit.
But if you are looking for clues as to whether or not we will see an improvement in the performance of these big name accountancy firms – as opposed to the prevarication, obfuscation, back-watching and resistance to change that we have at the moment – I refer you to what Rachel Reeves, the exasperated MP who chaired the enquiry, said to the great and the good of the UK accountancy profession assembled before her.
“I know you’re speaking to politicians but I wish one of you could give me a straight answer!”
At ipd, I specialise in straight answers – if a solution can be found I will tell you and outline it in the simplest, most understandable way possible. But, if a solution can’t be found, I’ll be honest and tell you that as well – there’ll be no spin to make the things I say look good when they aren’t.