Professional skills and personal responsibility

July 3rd, 2018
03 July

House of Fraser, Sir Terence Conran, Jamie Oliver, Toys R Us, Carillion – the big names that are in difficulty or going bust (or hoping to trade their way back to viability after a CVA) seem to grow every week. Those names, once the darlings of the media, are now making headlines for all the wrong reasons.

Now here are four more huge names that have lost a little bit of their sheen over the last few months – Deloitte, EY, KPMG and PwC. Hang on, I hear you say, these guys can’t be doing all that badly. After all, wasn’t it only in March this year that Grant Thornton announced that it would no longer bid for audit contracts because it was too difficult to compete with the Big Four as they are known in the audit world?

That’s true – but whether or not they are doing the very best job for clients in that market seems to be a matter of opinion.

Christopher Edwards, the Poundworld founder trying to buy back part of that collapsed empire out of administration has had a spat with Deloittes over what he sees as their slow reaction to his offer.

Deloittes begged to differ but, as joint auditors with KPMG of Carillion, they were still reeling from their mauling at the hands of the Joint Parliamentary Committee who were distinctly unimpressed with their performance of the failed construction giant. According to Accountancy Age: “In a series of scathing joint committee sessions MPs took to task Carillion directors, pension regulators and KPMG and Deloitte auditors– grilling them on missed red flags, aggressive accounting and the pension deficit reaching nearly £1bn”.

It added: “KPMG were grilled over why they had signed off on Carillion’s 2016 accounts on 31 March 2017, just months before the construction company issued its first profit warning in July and announced a £845m write-down in the value of its contracts. Just six months later the company was insolvent, collapsing with only £29m left in cash and over £1.3bn in debt”.

Well, yes – they do seem to have a point.

But that is nothing to what the Times’ veteran City commentator Patrick Hosking had to say about these auditing superstars. Pointing out that the jaws of the MPs had dropped when partners of PwC revealed that their team of hundreds were charging an average of £12,500 per week each to pick over the bones of Carillion, Mr Hoskings said that the Big Four were “more likely to be viewed as rapacious, inadequately regulated and ubiquitous”.

Ouch. For a more man-in-the-local-accountancy-practice viewpoint I turn to Andy Burn ACA who, writing to the Times from his home in Somerset, said that he thought Mr Hoskings was right on the money.

He added: “My view is that auditors (at every professional level but crucially at partner level) have lost the ability to think deeply about the unique commercial dynamics of complex businesses and both direct their inquiries accordingly and report appropriately.”

“Over the course of 40 years, standardisation of audit processes and reporting has killed off professional skills and personal responsibility and replaced them with the supposedly measurable adequacy of boxes ticked”.

Are you listening? That sound you can hear in the background is me applauding enthusiastically. At IPD we are clear and direct about what a problem is and how to solve it. If we see a box we may ask where it came from, how much it cost to manufacture and what you are hoping to sell it for.

But, we will never, ever – tick it.

I pride myself on attention to detail and particularly attention to the needs of clients and their creditors – they are not items on a checklist, they are real people.  I will give you my personal attention if you decide to pick up the phone and talk to me about your clients’ problems…