Ever since Andersen collapsed the question most frequently asked by
regulators examining choice at the top end of the audit market has been: ‘ Are
four firms enough?’
But with corporate collapse and market concentration intensifying, that
question no longer seems relevant. Instead, perhaps, we should be asking the
question: ‘Do we really need as many as four firms?’
Such are the extraordinary developments in financial services markets on an
almost hourly basis that any summary risks being overtaken by events. But, at
the time of writing at least, two banks have fallen (Lehman Brothers to
administration, Merrill Lynch to Bank of America); two others are entertaining a
shotgun marriage (HBOS and Lloyds TSB); and an insurer (AIG) has lost its market
It’s by no means confined to the financial services industry.
BA chief executive Willie Walsh has predicted that as many as 30 airlines
will go to the wall between now and Christmas on top of the 30 that have
already collapsed around the world in recent months.
XL, that most media-friendly of implosions given the way in which it lent
itself to images of stranded holidaymakers, is seen as the tip of the iceberg
when it comes to the wider travel industry.
Meanwhile the high street is in a torrid state, possibly only rivalled in the
gloom stakes by commercial property developers and house builders.
The upshot for the next 12 months is that auditors will trade clients as
businesses merge and lose them as others collapse. And given that much of the
shrinkage will be at the upper end of the FTSE and Dow Jones indices, we could
well see the number of audit clients held by each of the Big Four shrink.
I wouldn’t expect many commentators, as a result, to be asking whether four
firms are too few any time soon.
Will this affect jobs? Certainly. Will it cost jobs? In that sense it will be
harder to establish cause and effect.
In the US, Deloitte is making ‘adjustments to its workforce levels’ while E
&Y is freezing hiring in the UK. Those are, of course, programmes that will
be stepped up there and elsewhere if the global slowdown grinds any closer to a
halt or even a retreat.
Damian Wild is editor in chief of Accountancy Age and blogs at
HMRC breaches client confidentiality; and partner profits fall at EY. These stories and more discussed in Friday Afternoon Live
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group
Six new partners have been revealed by top ten firm Mazars