Should the Big Four accountancy firms be split up? This question has been floating around for some time, but now things are getting really serious.
The Financial Times is getting stuck into the issue big time, and today publishes a thoughtful ‘Yes-No’ analysis. On the ‘Yes’ side, Natasha Landell Mills, head of stewardship at asset manager Sarasin & Partners, argues that such a move to separate consulting and audit would prevent conflicts of interest.
“Multiple market failures need to be addressed. The most obvious problem is that audit quality is invisible to those whom it is intended to benefit: the shareholders, ” she argues.
Impose meaningful sanctions
Natasha, in a well-argued piece, concludes that “the accounting watchdogs must be far more robust on audit quality and impose meaningful sanctions. Even the best intentioned will struggle against a broken system.”
On the ‘No’ side, author Jim Peterson acknowledges that recent corporate scandals involving auditors are “deeply worrying”. But he believes that a break up would neither improve competition nor boost competition.
Reshaping the way we gather information
He notes: “The enthusiasm for cutting up the Big Four also fails to recognise how the world is changing. The rise of artificial intelligence, blockchain and robotics is reshaping the way information is gathered and verified. Auditors will need more — rather than less — expertise.
“Warehouse inventories, crop yields and wind farms will soon be surveyed rapidly and comprehensively in ways that could easily displace the tedious and partial sampling done for decades by squadrons of young audit staff. But to take advantage of these advances, auditors need to have the scale, the financial strength and the technical skills to develop and offer them.”
The FT is inviting people to join the debate by submitting their thoughts in less than 250 words. Why not get involved?
Personal service companies
The BBC is going to take a look at the “personal service companies” situation after criticism from presenters who said they were forced into setting up PSCs.
Four Beeb workers – Liz Kershaw, Kirsty Lang, Paul Lewis, and Stuart Linnel – appeared in front of the culture select committee examining BBC pay. Kershaw said she was offered radio work, but had “no choice but to agree to form a PSC”.
PSCs hit the headlines after BBC news presenter Christa Ackroyd lost an IR35 appeal and faces paying back about £400,000. The Beeb says it plans to set up a dispute resolution process to see whether or not it should pay employers’ NI contributions.
Regressive council tax
And finally, the Resolution Foundation is calling for “regressive” council tax to be scrapped.
The think-tank’s senior economic analyst Adam Corlett points out: “Typical council tax bills for the most expensive homes are only three times as high as for the cheapest. By contrast, the typical values of those top homes were nearly seven times as high.
“This lack of variation in tax bills is compounded by regional differences that mean tax rates tend to be higher in poorer parts of the country. As The Economist puts it, “Buckingham Palace attracts a council-tax bill of £1,400 a year, around the same as some flats in Bradford.”
