BusinessCorporate FinanceLook to the future now

Look to the future now

It’s tempting to ponder whistfully on the events of the past year and deliver a few well-honed observations

But this profession is never one to dwell on the past too long, so following
on from that fine tradition it’s time to cast an eye at what people should be
planning for the New Year.

Firstly, the profession needs a realistic and positive outcome from the
review of audit competition.

This is going to be tough but the Financial Reporting Council is going to
have to face some realities. An interventionist solution looks, from a practical
and philosophical point of view, like a blunt and unwanted instrument of change.
But in backing a market route the FRC will also have to make it very clear that
it has no doubts about the quality of work from outside the Big Four. Going
public with the details of audit inspection reports would be one means of doing
this.

Another key issue is where will the growth come from? Accountancy firms have
traded lucratively on a wave of regulatory change that is fading fast. How do
you replace all that income?

Service line innovation is a good bet, but as the Big Four have already
demonstrated, strategic mergers are the current flavour of the season as a means
of generating more business. Revenue figures for KPMG and Deloitte will look an
awful lot bigger next year which will place some pressure on PwC and Ernst
& Young to do some thing to keep up.

We could expect to see more mergers, or there might be acquisitions on the
cards. It remains difficult to see what kind of service line innovations prove
the big hit of the year.

But one thing firms can expect is that the campaign on tax avoidance will
continue. The chancellor’s appetite for clamping down seems unsatisfied. This
may therefore be the time when talk of a general avoidance principle becomes a
necessity simply so that everyone knows where they stand.

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