Too big to fail? Too good PR more like

Earlier today I saw Richard Murphy’s complimentary analysis of Guardian commentary about fears one (or more) of the Big Four might fail. He said:

Francine McKenna, Dennis Howlett, Prem Sikka (of course) and I have been saying so for some time.

What Richard doesn’t directly note and which none of ‘us’ have commented upon to date is the FUD (Fear Uncertainty and Doubt) spread by the Big Four in promulgating this story. Here is the central thesis of the Guardian piece:

“The FRC remains concerned about the significant uncertainty and cost which could arise in the event that one or more of the big four audit firms left the market. Regardless of the actions taken by market participants, this risk is likely to remain significant in the medium to long term. It remains to be seen whether market-led actions will prove to be sufficient to reduce this risk to an acceptable level.”

In bar room language among my peers – this is called grin f**king. There is no analysis or factual proofs offered as to what the cost issue might mean, even though it is repeated time and again throughout the article. This is a broad issue that Francine, Richard, Prem and I have aired on many an occasion and not once has ANYONE returned fire with a reasoned cost based argument that rebuffs what we have to say. Ergo – the Guardian’s regurgitation represents PR puff designed to scare the FTSE100 into keeping with the Big Four faith.

Colleagues in the profession find it hard to believe the Big Four can be brought to their knees in the way we describe. Given the lock they have on ICAEW Council and the way they dominate policy, that’s perfectly understandable. It’s also naive. Think a few moments. How many times have you provided a rational and fact based analysis that shows your client is about to hit a wall only to be told: ‘Ah yes, but that doesn’t apply to us.’? It’s that same suspension of disbelief in operation only on an industry wide basis. Crowdsourcing at its worst. What’s interesting is the language in which it is now couched: ‘exiting’ – not crushed – which is what ‘we’ believe is likely to happen. More PR methinks.

Richard thinks self regulation is a guaranteed failure. He may be right. I prefer a different approach that doesn’t necessarily mean torpedoeing the profession as a whole. Broadly, I say that ICAEW needs to step in, advise and start shaping a new framework for 21st century audit unencumbered of Big Four influence. That demands genuine leadership and a level of cross discipline collaboration that has been singularly lacking in the dialogue I’ve seen to date. Anything else runs the risk of leaving the profession as an irrelevant rump where companies seriously question the value of all those audit fees. And who could blame them? AICPA might also like to consider this line of reasoning.

Tagged as: Francine McKenna, FTSE 100 Index, Guardian, Richard Murphy