Mergers and amalgamations to stifle competition and reduce consumer choice are all the rage. Now the big accountancy houses have weighed in with the idea of multidisciplinary practices. This drive for MDPs is not governed by any concern for openness and public accountability, but by a quest for profits and monopolies.
The amalgamation of lawyers and accountants will pose new questions about auditing and accountancy services. It will exacerbate conflicts of interest and ethics and make the ‘independence’ problem insuperable. With the firms selling a wide variety of services, the income dependency on audit clients will be ever greater.
There will be even less incentive to question management. With the same law and accountancy firm serving competing companies, MDPs must create major new conflicts of interest. In the chase for profits Chinese walls can prove to be pretty flimsy.
An MDP environment makes strong structures for regulating plc auditors essential. But they are not in place. MDPs, therefore, create greater pressures for a single independent statute-based regulator.
And logically they should open the way to competition to the auditors’ monopoly. The firms claim that selling consultancy services to audit clients does not impair auditor independence. If so, why deny banks, financial services, companies, Tesco, pension funds, trade unions, or even (non-rail) Virgin, the ability to sell audits?
The major accountancy firms have continuously failed to deliver good ‘independent’ audits. So alternatives need to be explored. There are numerous kinds of auditors: financial, Customs & Excise, Inland Revenue, the Health and Safety Executive, food, environment, health and other inspectors. All these perform audits. In each case the auditee does not get to pick the auditor. None of these auditors ever acts as a consultant to the companies visited by them.
This public-sector model offers food for thought. The political appetite may be lacking, but there is no logical reason why the Revenue (for example) cannot audit major companies. Apart from delivering good, Austin Mitchell is Labour MP for Great Grimsby.
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