A couple of weeks ago, Britain’s next biggest firms of accountants, behind the “Big Four”, met with competition regulators to discuss limiting the Big Four’s dominance of the plc Audit market. Amongst the proposals tabled were to limit how many FTSE350 company audits the ‘big four’ should be allowed to conduct.
Officials from the ‘prize-chasing’ second tier (Grant Thornton, RSM, Moore Stephens, Mazars and BDO) are hoping to have some influence over the competition regulator’s decision as it investigates the Audit sector. The authority will be deciding whether to take further action and is currently working with the sector’s regulator, the Financial Reporting Council.
This is seemingly being done with MPs backing, with EY, KPMG, Deloitte and PwC having been accused of running an “oligopoly” that checks the books of nearly all the 350 leading companies in Britain, with “smaller” rivals barely having a look-in. As Michael Izzy (Chairman of the Institute of Chartered Accountants in England and Wales (ICAEW)) confirmed, “This is not being done in an environment of secrecy, with dialogue being held in the open, with MPs and the government being kept fully in the loop.”
It is fair to say that things are being done openly. In truth, there is also an expected outcome, certainly that the second-tier accountancy firms are wholly banking on. All five have been gearing up for the FTSE-door to be wedged open for them, building services and processes to demonstrate credibility to compete in that arena. For them, business advice, commerciality and client focus are being overtaken by risk management, control testing and assurance. The private business world might be right to feel slightly abandoned, particularly away from London, where the shift in focus may be more problematic for the firms’ regional offices. The impact on priority, skill sets and service levels afforded to the private business world is probably predictable.
In short, there may soon be nine accountancy firms, focusing all of their best efforts on the biggest 350 companies in the UK. The second tier “rabbits” are being somewhat dazzled by the FTSE350 headlights. Successful private businesses deserve better. Magma prides itself on providing a real, credible and dedicated alternative for the private business world. In fact, many of our people are former rabbits, who are passionate about working in and with the private business world!