Newman: China infected by Big Four clauses
BDO chief says Big Four clauses have spread to China as a result of their widespread use leading to boilerplate insertion
BIG FOUR CLAUSES are stifling competition in China as they have done in the UK, according to BDO’s international CEO Jeremy Newman.
A blog by Professor Gillis, visiting professor of accounting at Peking University’s Guanghua School of Management, claims the China Development Bank’s (CBD) loan contract with Harbin Electric reads: “No group member may replace the auditors, unless the new auditor to be appointed is any of Deloitte & Touche, PwC, Ernst & Young and KPMG.”
Newman (pictured) noted in his blog that the company’s current auditor, Frazer Frost, is serving out a suspension from taking on new clients imposed by US regulator the SEC following “shoddy” accounting work in China.
The CDB is unlikely to have made a conscious decision to include the clause, Newman argued, indicating it was a boilerplate insertion by legal advisors, “which in itself is evidence that these clauses are more widespread than the Big Four would like you to think”.
George Osborne recently called upon the Office of Fair Trading to investigate Big Four clauses and the firms themselves have welcomed the inquiry, saying it will finally lay the matter to rest.
Newman will stand down as global head of BDO in September, to be succeeded by Netherlands managing partner Martin van Roekel.