Eagland: 'Audit reform is opportunity for BDO'

BDO plans to take advantage of upheaval in the public interest entity audit market by tapping into corporate uncertainty around the provision of non-audit services by incumbent auditors, the firm’s incoming managing partner has told Accountancy Age.

Paul Eagland replaces the outgoing Simon Michaels who will complete his second and final four-year term on 1 October, and believes the best opportunity for the firm is to focus and build on its core offering as champions of the mid-market. The stats in the UK, he adds, show “six million employees, £1trn-worth of revenue and some of the fastest and most dynamic growing businesses”.

Eagland breaks the market down into roughly four parts. The public capital markets and the PIEs (public interest entities); private equity; private companies and wealth and the public sector.

“When we look at those and we look at our opportunities, the biggest change running through there is the change running through the PIE community,” Eagland explained. “There’s regulatory change and there’s uncertainty around the rotation of audit and ensuring that companies comply with not purchasing non-audit services from their auditor.

“That’s a big population – in excess of 2,000 very sophisticated groups which will have to consider what their their policy is on appointments and rotation of their auditors over a 20-year cycle who also, therefore, they turn to to buy other professional services.”

In June, the EU’s audit directive is to be introduced with the aim of opening the FTSE 350 market up to more audit firms such as Grant Thornton and BDO, among others. Central to those reforms are mandatory tendering and rotation of auditors every ten years.

In March, EY managing partner of assurance in the UK & Ireland Hywel Ball told Accountancy Age mandatory rotation could “further entrench” the Big Four’s market position, and even see them encroach on traditional non-Big Four market space. However, several non-Big Four audit partners disputed his assessment, suggesting it could take as long as ten years to see the fruits of the regulation.