Decades ago accountants were seen as monotonous but useful professionals in the strengthening capital world. However, that has slowly but surely changed over the past forty years. Partners at Big Four practice firms, whose salaries vary from £600k - £1m per year, are more likely to be seen as more voracious than most front office traders at Goldman Sachs!
The Big Four in the spotlight
In a recent turn of events the spotlight has been put on the Big Four and not in a good way. Top four auditors have failed many high profile companies (Carillion being the latest) leading to MPs calling on tighter regulations. Rachel Reeves, chairwoman of the business select committee, said last month after questioning KPMG, Carillion’s auditor, said: “Audits appear to be a colossal waste of time and money, fit only to provide false assurance.”
PWC is the latest firm to come under fire by MPs with one of them famously asking the PWC partners (who admitted that they had not yet done the work to answer one of his questions): “What does £20 million buy you these days?” after charging the government £20.4 million for the three months work it had done on liquidating Carillion.
The quick fix attempt
The frustration has led to policies being changed but this has not stopped opinions wondering whether this is another quick fix attempt to satisfy the electorate as well as Westminster. Stephen Haddrill, chief executive of the Financial Reporting Council, which regulates the profession, seems to have gone back on his word saying that he now believes it may be time to carve out the audit department. This shift in attitude is likely to be met with resistance from the top consultancies as it would take a great deal of money and many years to implement.
It has been only four years since the last review which led to minor changes in policy leading many to believe that a similar move is more likely than meaningful change. However, there is one thing many people seem to agree on: something has to change! “Unless something is done about it we’re not going to have an audit profession worth its name in ten years”. Those were the words of Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales.
The current market
Top 250 companies have been somewhat limited in their choice of who they would use to advise/audit them due to the potential risks associated with a less known brand. Many people seem to have perceived this as the Big Four trumping many smaller firms, leading to some of the latter practice firms choosing to pull out of serving listed companies to concentrate on the small to medium sized market. Smith & Williamson is a prime example in Britain, reducing their number of firms to just 34, this is down from 50 two years ago.
One thing is for certain, an auditor’s work is best performed when they act completely independently which becomes difficult when they need to make recommendations which may go against what a colleague is advising to the business. Many believe that separating the role of an auditor from the rest the accountant/advisory role is many years overdue. Auditors should be completely independent of clients, bankers and shareholders of companies.
How much of it sticks?
So, is there much substance in all this? The answer, in my opinion, is yes and no. In my dealings with the Big Four (and the smaller consultancies) – they add a great deal of value to a business. On the flipside, there have been many unsuccessful cases which, helped by the media hype, have attracted more attention than the successful work these firms deliver systematically. The audit world has changed but the stigma in many cases remains. Similar to every other profession there are two sides to every story but unfortunately the grief which auditors usually get is unjustifiable in my opinion.
We need to realize that auditors are an integral part of a business; we know that good auditors get paid handsomely and that’s because 99% of the time they produce fine quality work. They make a real difference in controlling and managing risk. Long gone are the days where auditors were seen as the police of an institution who walk around with a checklist. They need to have in depth knowledge of the business area they are auditing as well as the technical and entrepreneurial skills to think out of the box when looking for key risks. Furthermore, they partner up with stakeholders to become a key player in the team’s success whilst maintaining their independence. After all, it was lack of proper auditing which sent the world into meltdown in 2007!
View our opportunities in audit here.
** DEFAULT postresults.teaserlabel - en-GB **Professional Services
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As a manager in the audit, accounts and tax team at Marks Sattin, I take an interest in anything audit related. In fact, my favourite time of the year is the end of October, when the yearly top 100 Accountancy Age list is published! Having worked in this industry since 2012, I have seen the trends, and the changes, particularly in what is needed by the modern day auditor, and how this is constantly changing in line with market trends and general turbulent times. With fierce competition, and the increase in the number of service lines that firms offer, the modern day auditor needs to have it all! Auditors need to feel comfortable in many different areas such as accounts, tax and outsourcing, when servicing customers. There is also a huge focus on the softer skills like communication, influencing and negotiation. This is now a bonus to being able to technically complete the job, with an exam qualification tied in. This is one of the major changes that I have noticed in the professional services industry over the past five years. The other change we’ve noticed is within the Big 4, where there have been a number of high profile audits at firms such as KPMG with Carillion, PWC with BHS, Deloitte with Serco, EY with Thomas Cook, which have not portrayed the firms in a favourable light for a number of reasons. We have seen these audits result in fairly significant fines, as well as uncalculated damages to credibility. This has been affirmed by suggestions made within the professional services related press. It would seem as if the industry in general has had enough, and is looking to a higher power to rectify this situation. This may well be about to happen with the UK Government weighing up a proposal from the competition watchdog that would force all large listed businesses to appoint one Big 4, and one non Big 4 firm, to conduct joint audits. David Herbinet, global head of Mazars, echoed the change or shift towards non Big 4 firms having a seemingly unbreakable monopoly by saying, “We’ve had more invitations to tender for audits in the FTSE 350 market in the last six months than we have in the last ten years”. Scott Knight, BDO’s head of audit, supported this trend by saying that he had seen an “unprecedented” rise in demand. It has also been reported that FTSE 100 insurer, Prudential, and house builder, Taylor Wimpey, which are audited by KPMG and Deloitte respectively, have held early-stage conversations with “challenger” firms, including BDO and Mazars about switching their auditor. Fiona Baldwin, Head of Audit at GT, said that although it was “too early to tell” if attitudes amongst FTSE 350 audit committees were changing, she noted “we’re still being invited to tender, which is a positive sign”. Over the next couple of years, we expect the role of the auditor to continue changing, and the rise of challenger firms to steady. The insistence on Big 4 firms to complete an audit to a high standard represents a change for the better, which is good news for everyone. Non Big 4 or challenger firms will take a bigger slice of the “audit pie”, resulting in Big 4 firms not being so stretched for time and being able to complete a higher standard audit. It will be interesting to see these shifts happen, and be part of the process, as a recruitment partner to both Big 4 firms and non Big 4 firms. If you’re interested in learning more about our live roles, or would like to learn more about how we can help you with your recruitment strategy, please contact us for a confidential discussion.
** DEFAULT postresults.teaserlabel - en-GB **General
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‘The only constant is change’ has never rang more true and there is no facet of business that has not been changed dramatically by this year’s global events. It is not about adjusting to any ‘new normal’, it’s about making sure you can adapt adequately to this new, more rapid pace of change'. During May 2020, we produced a survey for our contacts to understand how their business was reacting to the pandemic and to gauge overall market sentiment. We received over 130 responses to key questions relating to their thoughts, reactions and predictions regarding the unprecedented level of change we are experiencing. Although market conditions are changing daily, the ease of lock down has brought a wave of positivity as we look to rebuild on the disruption of the past few months. With this in mind, the below report outlines some of the findings from our research, and our predictions for the future. Covid-19 survey
** DEFAULT postresults.teaserlabel - en-GB **Governance
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We hosted an internal audit roundtable in Leeds, attended by a group of senior professionals in internal audit, risk and compliance, from a wide range of organisations. The aim was to discuss topics that are currently impacting their profession, and share experiences and insights. We have summarised this conversation in an easy to read whitepaper, covering the following: Sustainability - climate change and environmental issues – what’s the reality?Governance - the new Corporate Governance code, internal audit’s role in risk management and auditing cultureIs internal audit creating the right impact? We talk about report writing and responding to new technologiesThe challenges of IT security, cyber risk and GDPR Download our whitepaper to read more on the topics disrupting the internal audit sphere 2019 Internal Audit Roundtable For more information on specialists markets or if you're looking for a new challenge or an organisation seeking additional expertise please email email@example.com or call +44 (0)113 242 8177.
£33,000 - £42,000 per annum
Leeds, West Yorkshire
£40,000 - £50,000
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Marks Sattin is currently working with a well-respected firm who is recruiting for a Senior Internal Auditor.
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