PracticeAuditBDO boss bemoans audit committee bias

BDO boss bemoans audit committee bias

The audit committees of large companies are dominated by Big Four alumni, according to BDO Stoy Hayward managing partner Jeremy Newman

He warned that the plethora of Big Four alumni on plc audit committees is
posing a major threat to audit choice and competitiveness.

His comments came as the debate on audit choice shifted to the activities of
the non-executives who dominate audit decision making. Pension funds are showing
an increasing interest in the activity of the committees.

In an outspoken post on his blog, Newman said that following conversations
with various audit committee chairman, he suspected that as most were Big Four
alumni they tended to favour the giant firms.

‘I suspect it [the Big Four bias] reflects the fact that most are Big Four
alumni and they are all members of Big Four “networking groups” and get
significant technical and other support,’ Newman said.

Newman said BDO Stoy Hayward was considering offering similar technical
support, but he remained concerned whether such an initiative ‘would get the
necessary support from non executives’ given their links to the Big Four.

The BDO Stoy Hayward boss also said audit committee chairmen were reluctant
to look beyond the Big Four as it may reflect badly on them if a company had a
bad spell.

‘They [audit committee members] are concerned about the personal risk to them
and their reputation if they encourage the companies of which they are directors
to change audit firms, particularly to a non Big Four firm, and there is a
subsequent management failure or economic downturn,’ he said.

The Local Authority Pension Fund Forum is currently working to ensure all
companies have audit committees serving shareholders.

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