Take two firms. Combine, and mix in their audit methodologies and software systems. Then sprinkle in 61,000 staff over the summer for retraining in the resulting audit process and prepare to launch immediately – and seamlessly – on clients.
It sounds like a recipe for disaster. But PricewaterhouseCoopers has just completed one of the world’s great retraining exercises in a little over 100 days.
It is a task that has drawn on the new firm’s deep reserves of talent from around the globe and, for many of the people involved, it proved for the first time what a truly gigantic and worldwide firm PwC is.
Former Price Waterhouse audit chief Rodger Hughes, PwC’s new UK head of Assurance and Business Advisory Services, was charged with overseeing the change process.
The service’s roll-out comes at a welcome time for PwC after last week’s loss of the prestigious Diageo audit to KPMG. It offers the firm a chance to get behind its new system and reassert its ‘audit focus’.
Hughes was aware of the size of the task facing him.
Initial discussions with his Coopers & Lybrand counterparts revealed deep scars from its previous merger with Deloitte Haskins & Sells.
‘When they merged, it took a year to decide whether the audit papers should be completed in pencil or ink,’ Hughes recalls, adding that it was vital that PwC – or Newco, as it was known during the merger talks – avoided the two-year ‘knocking together’ period endured so often by other merged firms and forecast again by the doom and gloom merchants this time.
‘Our objective was to create a common audit methodology for PwC and to get it in place to do the December 1998 audits,’ he explains.
It is a seemingly simple mission statement for an exceptionally tall order. ‘There we were still fighting each other for work and both thinking we had the best audit “mousetrap”. How the hell were we going to agree on something that we could both buy into?’ he adds.
The task was complicated by strict regulatory procedure which forbade the two firms from working too closely together. But within six weeks – by mid-February this year – the basic audit framework revolving around eight key principles had been agreed. Technical experts from both sides were then ‘locked away’ in a hotel for a week to study both firms’ systems.
Coopers’ CLASS ’97 system was adopted as the basic software, while functionalities from PW’s TeamMate, which was due to be rolled out next year, were bolted on.
PW’s team-working audit methodology was adopted as the new firm’s standard to complete the process. The result is TeamAsset – ‘evolution, rather than revolution’ as Hughes puts it.
Hughes rejects any suggestion the new system is a compromise, insisting instead that it was simply a question of taking the best parts of each firm’s ‘mousetrap’.
Ideally, clients will not notice the difference. If they do, claims Hughes, it will be for the better. ‘If they see any benefits this year, then that’s terrific,’ he says.
‘But it will only be in the second year that they should start to see the real benefits of greater efficiency and effectiveness. The message from clients has been “we are happy with the audit service we have at the moment and we don’t want that to change”.’
‘This merger won’t disrupt things as we’ve put in an enormous amount of effort up front to make sure of that,’ Hughes adds.
Central to that effort is the retraining of PwC’s staff. Initially, the plan was to retrain the major countries first and gradually roll out the system to the firm’s offices around the world. But PwC opted to train all its staff in a three-month blitz. The process was compulsory and partners will not be allowed to sign off an audit unless they have retrained.
Time will tell if PwC’s Team Asset is a winner with clients. Hughes, and PwC, obviously want it to succeed to help prevent the loss of valuable clients such as Diageo.
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel