RSS feedsHe warned that the plethora of Big Four alumni on plc audit committees is posing a major threat to audit choice and competitiveness.
His comments came as the debate on audit choice shifted to the activities of the non-executives who dominate audit decision making. Pension funds are showing an increasing interest in the activity of the committees.
In an outspoken post on his blog, Newman said that following conversations with various audit committee chairman, he suspected that as most were Big Four alumni they tended to favour the giant firms.
‘I suspect it [the Big Four bias] reflects the fact that most are Big Four alumni and they are all members of Big Four “networking groups” and get significant technical and other support,’ Newman said.
Newman said BDO Stoy Hayward was considering offering similar technical support, but he remained concerned whether such an initiative ‘would get the necessary support from non executives’ given their links to the Big Four.
The BDO Stoy Hayward boss also said audit committee chairmen were reluctant to look beyond the Big Four as it may reflect badly on them if a company had a bad spell.
‘They [audit committee members] are concerned about the personal risk to them and their reputation if they encourage the companies of which they are directors to change audit firms, particularly to a non Big Four firm, and there is a subsequent management failure or economic downturn,’ he said.
The Local Authority Pension Fund Forum is currently working to ensure all companies have audit committees serving shareholders.
