Firms eye up Audit Commission work

It’s difficult to fully understand the ramifications of the coalition government’s decision to scrap the Audit Commission so soon after the event, but what is already clear is that the accounting industry is set for upheaval – and opportunities – as part of that process.

The commission audits around £200bn in funds across 11,000 local public bodies, and leans on the Big Four firms to carry out some of its work.

There have already been suggestions that scrapping the body, from 2012, to allow local decision-making over who undertakes the work, will be a boon for the top firms. Some advisers have suggested the move will allow the Big Four and other large firms to “low-ball” to win work, which would fly against the coalition’s plans to open up government contracts to smaller firms.

“When matters come up to district and particularly county council level, I have a fear that if the work is ‘privatised’, local government officers will find themselves being ‘low-balled’ by… top 12 firms,” said Critchleys director Anthony Harris.

Conversely, others believe the biggest firms will be able to carve up the market and charge a premium for the pleasure. Will Abbott, partner with Gloucestershire-based firm Randall and Payne, said: “My experience is that local authorities have a tendency to set arbitrary thresholds when it comes to tendering for any type of work.”

The Big Four were reticent to talk about an existing client, but PwC’s government and public sector assurance leader Paul Woolston said the firm welcomed the opportunity to “respond to a more open market”. It “would want to work closely with the Audit Commission to ensure an orderly transition, were we to take on any of its current clients.”

In our view

The issue covered here, on what the Big Four will charge individual councils for work, is just the tip of the iceberg. For example, will we see an influx of public sector accountants into the top 20 firms to cover this free market of ‘public’ audit work?