The 80s was the decade when huge economic growth, combined with a post-war generation reaching its early maturity, brought immense prosperity to the accountancy profession. It also sowed the seeds for its demise in the eyes of the public.
In those days, there was a ‘Big Eight’ of accounting firms rather than the somewhat diminished ‘Big Four’ in place today. And they were stuffed to the gills with bright, young and ambitious accountants.
This was the post-war generation flexing its muscles. Senior partners were being appointed to the big firms in their mid-40s. This was seen as being excitingly youthful. The older generation, built on trying to be wise and professional, were on their way out, partly worn down by the economic disasters that had beset Britain in the two post-war decades.
This change meant that brighter and younger people were increasingly running things. This wasn’t always to the advantage of the firms, even though the subsequent growth was astonishing.
As the profession’s weekly newspaper, Accountancy Age was on the crest of its maturity. It had moved from being the Sun or Private Eye of the profession (as it was often referred to by the great and the good of accountancy), to being the accepted news provider for accountants. It did this by having an agenda dominated by news.
It was a time when it was enormous fun to work on the Accountancy Age team. But it was also a time when outwitting the national newspapers and breaking news stories became a matter of course.
If the profession wanted to know what was going on it knew, there was only one place to find out. As the firms expanded, the recruitment section in Accountancy Age swelled and issue sizes of more than 100 pages became commonplace, though not always popular.
Having proudly run a flash across the top right of a front cover marked ‘biggest ever issue’, we were rather surprised to receive furious letters from readers saying they couldn’t cope with so much information and asking us to cut the size back.
The rapid growth that the profession experienced also brought its problems. That most traditional of issues, competition among professional firms, came to the fore. The Monopolies and Mergers Commission decided that, to increase competition, the profession should be forced to lift its restrictions on advertising.
The initial efforts at advertising in 1984 were embarrassingly naive. Deloitte’s first effort showed an accountant sitting in the dark, which rather confirmed what the general public seemed to think about the profession. It was at this point that the firms had a choice. They could stick to their independence. Or they could start trimming their independence in the face of client pressure. Increasingly they chose the latter.
It was a disaster. The audit, to use the jargon, had become commoditised. In the 70s, Accountancy Age used to run a regular update on the number of audit qualifications. These were seen as an indictment of less than savoury financial reporting in the corporate sector.
In the 80s, the audit qualifications dried up. Finance directors had the leverage and the advantage. Audit firms increasingly did not stand firm. Finance directors could sack them and claim ‘commercial reasons’. This deflected scrutiny of their financial reporting and instead made the audit firm sound as though it was to blame.
What Sir David Tweedie later referred to as the ‘creeping crumple’ began. Finance directors would take an audit partner aside and point out that one of the other firms was quite happy to approve the accounting policies he was taking exception to. The firms largely crumpled. And they started competing on price. Lowballing became the buzzword. Price Waterhouse would become known as Cut Price Waterhouse.
Take these two examples of differing practice in the industry at the time. In 1983, an intrepid news hound at Accountancy Age discovered that a big-name auditor, under pressure, had removed the sensitive parts of an efficiency study it had carried out for one of the big utilities.
We printed them. The then senior partner of the firm arrived in our offices offering to pay for the pulping of the edition that was due to reveal this. He also offered to pay for a new edition, without the offending story in it.
We let him have his say, told him to bugger off – and then pointed out that if he had done his research he would have known that the issue was already in the post and on its way to our readers.
The second example concerns Sir David, then with Thomson McLintock, last of the great independent Scottish firms. He had been called in as a respected academic and technical partner, to produce a report for the Coal Board in the midst of the miners’ strike.
The head of the Coal Board, Ian McGregor, wanted it to show that his figures on uneconomic pits were right. McLintocks were the Coal Board’s auditors. Sir David had a dilemma. He went in to see Bill Morrison, the senior partner. In a legendary utterance, Morrison said: ‘We get the right answer – we lose the audit. Tough’.
All of these tensions would come to a head in the early 90s with a series of scandals at large, prominent companies involving weak auditing. Happily, plans were laid in 1988 for the new Financial Reporting Council and Accounting Standards Board, both free of the compromises of the accounting bodies, and which under Sir David would bring discipline to unruly companies and their auditors.
Meanwhile, Accountancy Age was the only publication to print a withering critique of Robert Maxwell’s annual accounts. We never knew how we escaped the wrath of the famously litigious old bully.
The decade ended in a prolonged bout of merger failures. The Scots, sadly, voted down a chance to dominate the English profession in a proposed British Institute. And in a series of endless musical chairs among firms, Price Waterhouse pulled out of its plan to merge with Arthur Andersen. Hindsight is a wonderful thing.
But above all the 80s was a great period in the Accountancy Age story. And we journalists had an enormous amount of fun chronicling it.
Robert Bruce was the editor of Accountancy Age from 1981 to 1990. He is a regular contributor to the Finacial Times.
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned
The Financial Reporting Council has issued guidance regarding the annual reporting of 1,200 large and smaller listed companies. The letter highlighted the key issues and improvements that can be made in the 2016 reporting season
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
Company bosses are considering relocating operations or headquarters away from the UK following the country's decision to leave the European Union