Lording it over the little people
High-profile examples of how the Big Four accountancy firms exert too much
political influence are, unfortunately, all around us.
Currently, two of the most prominent issues facing the industry are
international auditing standards and ethical standards, both of which have been
implemented through government policy, partly due to the Big Four’s influence.
The Big Four represent a large proportion of international companies. This
can result in their interests being focused outside of the UK. Take the
introduction of IAS.
While these new regulations will have a positive impact on international
corporations, for the UK SME sector they are likely to cause nothing but
The SME sector neither wanted nor needed the changes, yet the Big Four influence
has helped them become a reality. Now the Big Four are said to be raising their
fees by 25%, due to something that they have helped bring about.
Ethical standards are another example of where the Big Four have campaigned
for and achieved something that does not affect the majority of the UK market.
Guidelines such as the avoidance of self-interest, self-review and informed
management were never relevant for the majority of smaller accountancy firms’
clients. This simply creates more red tape for the average SME in the UK.
If smaller accountancy firms had the influence of the Big Four and therefore
were able to represent that SME market, perhaps things would have been different
and more relevant to the vast number of smaller owner-managed companies that
make up the bulk of the UK’s businesses.
On a positive front, there are still opportunities for smaller firms and
their SME client base to get their voices heard, and it’s up to us to maximise
As a group, we already collaborate with the DTI’s Small Business Service Tax
Policy Unit. But this is not enough. We need more opportunities to cast our
influence in order for politicians to receive a truly representative sample of
opinions from those of us operating in the real world of UK business, rather
than always drawing on the Big Four.Mike Sheppard is vice-president of the
They should be giants
Treasury fees to the Big Four of £859,000 in 2005 pale into insignificance
compared with total public spending. So to suggest that the UK government is
unduly dependent on the Big Four is seriously misleading.
The Big Four’s campaign to establish a cap on auditor liability seems
entirely reasonable, and their efforts to see this bill passed are not an
example of muscle being flexed, but of reasonable attempts to lobby for a fair
It is right that auditors should be held accountable for their actions, but
it is wrong for the whole firm to be punished for the actions of an isolated
engagement. In the past, several significant audit firms have faced the real
spectre of insolvency for the firms, and partners personally, from a single
client (examples being BDO Binder Hamlyn and ADT, and Ernst & Young and
Limiting liability protects the audit business, not from the consequences of
negligent audits, but from meltdown with far-reaching consequences. Liabilities
from one audit could mean that hundreds of thousands of people could lose their
jobs and the auditing climate would consolidate further and become more
The influence the Big Four exert on government is not disproportionate to
their position. They deserve some influence, as they are significant
contributors to the UK economy. The UK has a subtle system of influences on the
exercise of power and there are considerably more powerful groups that have the
ability to pressurise government, such as Friends of the Earth, the media or
Just look at the huge pressure recently brought to bear on education
secretary Ruth Kelly by the media about people with criminal records working
with children at schools. These groups do significantly influence government
decisions, much more than a few auditors on secondment to the Treasury.
As an independent consultancy, we have nothing to gain from defending their
position. But chastising the Big Four for what seems entirely reasonable is
itself entirely unreasonable.
Thayne Forbes is joint managing director of Intangible Business
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