Since the publication of the Oxera report on competition in the UK audit
market the argument over what to do next, or who is capable of doing the audits,
has been relatively low key. But the publication on this page of the views of
Jeremy Newman, managing partner of BDO Stoy Hayward, places a marker in the
His statement marks an attempt to counter what he sees as the growing
view that even though the report has said there is not enough choice among
auditors, only the Big Four can service the biggest companies.
He is responding to Peter Wyman, head of professional affairs at
PricewaterhouseCoopers, who wrote in Accountancy Age on 27 April, that the Oxera
report confirms why the Big Four are auditors of choice. Newman challenges this
reading, bluntly insisting that it is incorrect.
Using more robust language, Newman says that the claim that the Big Four
have the best people people just isn’t true. There is no monopoly on ‘the best
people’ for the Big Four. In challenging this perception Newman highlights the
ground that will be most hotly fought over in the coming weeks and months ahead,
as regulators and the profession attempt to forge a solution to the audit
Comment by Jeremy Newman
Along with others I welcome the recent publication of the Oxera report. The
report reminds us of the current domination of the fully listed company audit
market by the Big Four – a domination that is unnecessary and, in the view of
many, unhealthy. Indeed there are concerns about the risks this creates for the
continued smooth operation of the capital markets that prompted the DTI and FRC
to commission this report.
It is instructive to see how the Big Four – or at least the largest firm, PwC
– have chosen to respond.
In his recent article in Accountancy Age (Appetite for Change, 27 April),
Peter Wyman suggests that the Big Four are ‘auditors of choice to the FTSE350;
largely because they are seen to have greater capacity and international
coverage, the best people, industry specific knowledge, and to provide relevant
“value added services” ‘.
This may be his view but it is not the view expressed by Oxera – nor is it
correct. Oxera make it clear that: ‘Reputation is an important driver of choice…
whether this is based on real or perceived differences with the mid-tier firms.’
The challenge for mid-tier firms is to show that these differences are
perceived and that, except for the largest global companies, there are no real
differences of substance.
I accept that it is a fact that the Big Four have greater capacity and
international coverage – but greater does not necessarily mean better. Further,
for all but the largest global companies, several mid-tier firms have more than
sufficient capacity and international coverage.
I totally reject Peter’s assertion that the Big Four have the ‘best people’.
The quality of people outside the Big Four are, in many cases, as good as, if
not better than those people who work for the Big Four. I am sure that PwC has
some great people, but so do we and I am sure so do many others.
Only a partner in a Big Four firm would have the arrogance to suggest they
had a monopoly on good people.
Equally, many firms including mine have industry specific knowledge and an
ability to deliver ‘value added services’.
Indeed we provide tax, corporate finance, forensic accounting and other
services to a number of FTSE 350 and FTSE 100 companies. They are happy to use
our services because we have great people and all the other necessary
It is correct that significant investment is key for entry into the FTSE 350
market and there have been considerable investments made by mid-tier firms to
expand the volume of services on offer and provide an integrated and experienced
BDO International is the fifth largest global accounting network and we
continually invest in our services and staff.
Our employment proposition, recognised by many awards – including Accountancy
Age’s Employer of the Year for both 2004 and 2005 – attracts world-class staff
with the necessary intelligence and ability to work with FTSE 350 companies.
My firm, and others, are committed to enabling Audit Committee Chairs,
Finance Directors and others to better understand what we can offer and so help
provide a wider choice.
Jeremy Newman is managing partner at BDO Stoy Hayward
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