PracticeAccounting FirmsFirms big and small face independence issues

Firms big and small face independence issues

Small clients need their hands held, but practices must still beware independence issues, says Kevin Reed

IN CASH-STRAPPED TIMES, the pressure on accountants to overstep the mark for the sake of retaining revenue streams is stronger than ever.

Maintaining objectivity and independence is key for auditors. At the highest level, firms are facing the strain of market intervention, despite their protestations that the quality of their work is in no way diluted by offering non-audit services to existing clients.

At the other end of the market Accountancy Age, professional bodies and business lobbyists extol getting as close to clients as is acceptable, providing them, their suppliers and lenders with assurance regarding their finances – and to help steer them through the travails that smaller businesses perennially face.

So I have some sympathy regarding the plight of two accountants, whose firms have been disciplined for finding themselves beyond ‘ethical thresholds’ of reliance on clients – or in other words, they looked after clients who represented too large a proportion of their firms’ respective fee income.

The thresholds are in place to warn firms off from becoming too reliant on any one client, and prevent placing their independence at risk.

The vast majority of firms have enough on their plates holding onto clients, or being paid by those who do stay with them.

So it’s a tough situation, and very tempting to hold onto the client and in your own mind believe that independence is not affected – while also trying to win other clients to dilute the existing clients’ effect on overall fee income.

But for the profession to maintain its lofty status, even the smallest firms have to be strong, brave and recognise that independence and objectivity is key – the perception of the profession and its vaulted status is at stake.

It will be interesting to see how the world’s biggest firms deal with this in their negotiations and lobbying to water down current EU proposals to break them up.

Whatever the outcome, will they end up with their heads held high, or give off the perception that they’ve merely fought to hold onto all that’s dear?

Interesting times indeed.

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