The Big Four are moving fast to build up data and analytics offerings, but when will they deal with concerns about how robust and transparent their audit work is? asks Kevin Reed
IT WAS GOOD to see the Financial Times pick up on the data and analytics skills the Big Four firms are building, acquiring, to provide clients with the most ‘21st century’ set of services.
These mega businesses have shown, over the last forty years, they can leverage their unique position to understand the pressures and requirements clients face, and help deal with them. At the smaller end of the market this has been driven by, among other things, the disappearance of the local bank manager.
The biggest firms are in receipt of stacks of information about clients and markets that they can digest and make sense of on their behalf. This business nous, to make the most of their skills and brands, must be applauded.
But are we at that time again, where the big firms provide such a vast range of services to clients, that managing conflicts becomes too onerous? We went through the cycle of consulting arms being sold off in the early noughties, a move that Deloitte avoided – perhaps more by luck than judgment.
The firms will argue that they are much more vigilant about the services they can, or can’t, provide to an individual client – regulation has also played a hand in this.
But there are ongoing, big, concerns that the big firms are too close with clients, damaging the capital markets by failing to properly grill clients and signing off audits that required more vigour. Firms respond by saying that they’re doing what an audit asks of them.
Ironically, ‘hand-holding’ clients is positively encouraged at the other end of the market. Statutory tax and accounting services are no longer the preserve of old-fashioned accountancy practices, so they have to leverage that relationship to provide more valuable services, whether advising on financing arrangements or more nitty-gritty areas such as cashflow management.
But smaller practices aren’t representing listed companies, whereas the big accountancy firms are – and must work to a different code.
Should the big firms put more effort into managing that most fundamental of their services, audit? The one which they can leverage to make more revenues out of their client base? Or should they continue their extended love-in with the Silicon Roundabout and the rest of the UK’s boutique IT and data consultancies?
Putting the audit and tech issues into the same pot, and the firms will say that technology has made it easier to spot instances of unusual financial and transactional behaviours.
But will these tech-heads and analytical specialists go and visit client sites? Will they know the right questions to ask, and of whom? Will they be able to tell that the stock inventories contained in an Excel spreadsheet correlate with that contained in a warehouse?
We can applaud the incredible growth of the biggest accountancy firms alongside the performance of other accounting practices, but the big firms must embrace the responsibility of managing the audits of the capital market’s top protagonists.
In that context, it would be preferable for there to be a public company audit model that works for investors, regulators, government, clients and accountants, and that should be the priority…ahead of our top professionals looking at the next way to make a buck.
Kevin Reed is editor of Accountancy Age