Is this the way for big brands to rebuild the good name of accountancy?

May 15th, 2019

One of the most annoying aspects of the high-profile audit failures by big brand accountancy firms – and there are many – is the reputational shadow it casts over the profession as a whole.

Most local and regional accountants that I work with are hardworking, sensible, professionals who do a good job for their client businesses. We need to remember this at a time when the media is full of examples of Grant Thornton, KPMG, Deloittes and others dragging the good name of accountancy through the mud.

The failures obviously have significant impacts on the client companies themselves, their employees and shareholders. Accounting errors discovered at Goals Soccer Centres led to its shares falling by more than 30 per cent. Carillion went spectacularly bust just a few months after a cheery “nothing to see here” audit. Patisserie Valerie is shedding staff and looking for a buyer after its audit apparently missed what looks like a £40 million fraud. You know. That sort of thing.

The big-name accountants probably thought their cosy relationship with the audit watchdog, the Financial Reporting Council, would shelter them from criticism. But then the FRC announced that it had stopped going out for posh private dinners with the firms it was supposed to be regulating (big deal – it should not have been accepting those dinner invitations in the first place). And now the FRC is going to be replaced altogether by an (apparently) much tougher regulator. Large fines are currently being handed out for ‘wholesale failures’ in audits. And there is talk of the Big Four – KPMG, Deloittes,  EY and PWC – being forced to separate their audit and consulting businesses. 

So – is this what I see as the way for the big brands to rebuild the good name of accountancy as implied in the headline to this piece?

Good heavens, no! For that, we have to turn to Bob Addams, from Brighton, who wrote to The Times about Grant Thornton being fined £21 million for auditing negligence in the case of Assetco.

“In ancient Rome when a bridge was opened after its scaffolding was removed, the engineer had to stand underneath it”, the excellent Mr Addams pointed out in his letter: “If an equivalent measure could be devised that penalised auditing companies for incompetence or, worse, collusion, then we might see fewer collapses of large businesses on which thousands of job holders, pension funds and shareholders rely”.

Enter the Independent Professional: independents are non-huge practices, often sole practitioners or firms up to 5-6 partners.  Their success and growth depend upon them being consistently exceptional at what they do and by being accessible by their clients.  I regularly work with many accountancy practices like this and at ipd I also pride myself on working directly with a client.  You can find out a little more about us here.

I commend the idea to the House.