With the newspapers full of the banking collapse, and the global financial
system lurching from one crisis to the next, many in the profession will be
wondering what happens next?
It’s a question that taxes economists as much as it does auditors. John
Hawksworth, head of macroeconomics at PricewaterhouseCoopers, says the issues
could be ‘very serious’ if they don’t get resolved.
‘But we just don’t know quite frankly… it isn’t a matter for a single
forecast. There are so many different pressures [for companies and FDs].’
Hawksworth says any number of scenarios could emerge, the question appears to
be more the depth of the recession than whether or not there will be one. So how
are the industry’s service lines bearing up?
BDO partner Peter Hemington says: ‘We’re somewhat surprised that corporate
finance transactions have held up very strongly with levels as high as they’ve
ever been. There has been quite a lot of restructuring work that involves
corporate finance, as well as restructuring which involves selling the business
or restructuring the bank facilities.’
‘We’re also doing more public-to-private work, involving taking companies off
the stock market.’
The crisis has also given acquisition opportunities to larger companies and
other private equity institutions. ‘That is going to be the big issue for the
next few years, with a lot of corporate activity around the private equity
community very keen to buy companies,’ he says.
There have been some obvious high-profile insolvencies: Lehman Brothers the
most notable. But some say banks are trying harder this year to avoid losing
‘These days banks are keen to avoid insolvencies. They prefer to restructure
where they can. They want to catch problems as early as possible to see if they
can help. There’s definitely a rescue culture which wasn’t there in the last
recession 15 years ago,’ says Hemington.
Auditors will be hoping that the recession does not witness the levels of
litigation seen in the past.
Mayer Brown partner Clare Canning says: ‘It is inevitable that, in the nature
of economic crises, people look to the nearest deep pockets. Hopefully, putative
claimants will have learnt from the experience of the BCCI and Equitable
proceedings not to launch ill thought-through claims in an attempt to blackmail
the professionals. In any event, it is too early for accountants to be in the
frame and far from obvious that there will be any reason to criticise them.’
Whatever happens with litigation, some auditors have already lost
high-profile clients, and it would be a surprise if more didn’t follow. That,
combined with the devastating effects on the UK’s public finances and the
consequent tax demands that will follow, is set to affect the profession for
some time to come.
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