RSS feedsSince the publication of the Oxera report on competition in the UK audit market the argument over what to do next, or who is capable of doing the audits, has been relatively low key. But the publication on this page of the views of Jeremy Newman, managing partner of BDO Stoy Hayward, places a marker in the sand.
His statement marks an attempt to counter what he sees as the growing view that even though the report has said there is not enough choice among auditors, only the Big Four can service the biggest companies.
He is responding to Peter Wyman, head of professional affairs at PricewaterhouseCoopers, who wrote in Accountancy Age on 27 April, that the Oxera report confirms why the Big Four are auditors of choice. Newman challenges this reading, bluntly insisting that it is incorrect.
Using more robust language, Newman says that the claim that the Big Four have the best people people just isn’t true. There is no monopoly on ‘the best people’ for the Big Four. In challenging this perception Newman highlights the ground that will be most hotly fought over in the coming weeks and months ahead, as regulators and the profession attempt to forge a solution to the audit conundrum.
Comment by Jeremy Newman
Along with others I welcome the recent publication of the Oxera report. The report reminds us of the current domination of the fully listed company audit market by the Big Four – a domination that is unnecessary and, in the view of many, unhealthy. Indeed there are concerns about the risks this creates for the continued smooth operation of the capital markets that prompted the DTI and FRC to commission this report.
It is instructive to see how the Big Four – or at least the largest firm, PwC – have chosen to respond.
In his recent article in Accountancy Age (Appetite for Change, 27 April), Peter Wyman suggests that the Big Four are ‘auditors of choice to the FTSE350; largely because they are seen to have greater capacity and international coverage, the best people, industry specific knowledge, and to provide relevant "value added services" '.
This may be his view but it is not the view expressed by Oxera – nor is it correct. Oxera make it clear that: ‘Reputation is an important driver of choice… whether this is based on real or perceived differences with the mid-tier firms.’
The challenge for mid-tier firms is to show that these differences are perceived and that, except for the largest global companies, there are no real differences of substance.
I accept that it is a fact that the Big Four have greater capacity and international coverage - but greater does not necessarily mean better. Further, for all but the largest global companies, several mid-tier firms have more than sufficient capacity and international coverage.
I totally reject Peter’s assertion that the Big Four have the ‘best people’. The quality of people outside the Big Four are, in many cases, as good as, if not better than those people who work for the Big Four. I am sure that PwC has some great people, but so do we and I am sure so do many others.
Only a partner in a Big Four firm would have the arrogance to suggest they had a monopoly on good people.
Equally, many firms including mine have industry specific knowledge and an ability to deliver ‘value added services’.
Indeed we provide tax, corporate finance, forensic accounting and other services to a number of FTSE 350 and FTSE 100 companies. They are happy to use our services because we have great people and all the other necessary attributes.
It is correct that significant investment is key for entry into the FTSE 350 market and there have been considerable investments made by mid-tier firms to expand the volume of services on offer and provide an integrated and experienced international network.
BDO International is the fifth largest global accounting network and we continually invest in our services and staff.
Our employment proposition, recognised by many awards – including Accountancy Age’s Employer of the Year for both 2004 and 2005 – attracts world-class staff with the necessary intelligence and ability to work with FTSE 350 companies.
My firm, and others, are committed to enabling Audit Committee Chairs, Finance Directors and others to better understand what we can offer and so help provide a wider choice.
Jeremy Newman is managing partner at BDO Stoy Hayward
