'We still offer a quality service' claim corporate financiers

They were responding to criticisms from private equity heavyweight Jon
Moulton, the founder of Alchemy Partners, who said that accounting firms were
disclaiming everything, validating little and wasting time on engagement
letters. Moulton added that firms had become too tentative and were reluctant to
provide meaningful opinions.

Gareth Taylor, a director of corporate finance at Deloitte, however, says it
would be reckless for accounting firms to ignore the disclaimers and legal
requirements of engagement letters. Taylor says that given the litigation risks
firms were facing in the current environment made legal protections a necessity.

‘You can do your risk management to a certain level, but without dealing with
the knotty legal issues and the possibility of litigation you would be putting
your practice at risk,’ Taylor said.

Ian Smart, head of corporate finance at Grant Thornton, acknowledges that
accountants need to take Moulton’s comments onboard, but adds that the high
risks facing the profession mean that boiler-plate statements are inevitable.

‘Accountants need to respond the concerns from clients that views are been
unnecessarily clouded with caveats and disclaimers,’ Smart says. ‘Accountants
are employed to provide genuine opinions, but with the overbearing threat of
litigation there has been an unfortunate clouding of views.’

Taylor says, however, that it would be equally dangerous for accountants to
become completely obsessed with legal matters at the expense of delivering a
quality product.

‘Clients want a quality product, and a firm that uses disclaimers as an
excuse for poor work is not going be around for long. When a firm works with a
client, there has to be an understanding that despite the legalistic game the
work provided is of a high standard,’ Taylor says. He adds that if firms do not
provide a quality service, clients will quickly go elsewhere. This could ruin a
firm’s future just as much a damaging legal claim.