Big Accountancy Firms: Conflict Zone

Date : 19 October 2003

To : The Editor, The Business

From : Nagindas Khajuria

Subject : Big Accountancy Firms

BIG ACCOUNTANCY FIRMS

Conflict zone

Sir - The article on the Big Four accountancy firms ("Fires that won't go out for the Big Four", 12/13 October) raises interesting issues about the need for a new business model for them. Their dominance of 78% market share in audit services, probably worldwide, should be curtailed to around 50% by giving opportunity to second-tier accountancy firms, who who could bring in better and fresher ideas. Internal audit should be abolished, and all work relating to internal audit should be done by the audit firms as part of better quality external financial and operational audit procedures by the Big Four.

Tax compliance and tax planning; corporate finance; management consultancy and human resources; and external audit are mutually exclusive disciplines. The Big Four should be split again so that they would be allowed to provide only one of these. As there is so much cross-holding between large companies, the problem of conflict of interest will not go away simply by allowing the Big Four to continue offering the other services to non-audit clients.

The same audit firm is auditing the same client often of 30 to 50 years. One firm should never be allowed to audit for more than five years. What's more., too many government contracts are also given to the Big Four firms as opposed to second-tier firms. That should also change.

Attempts to issue International Accounting and Audit Standards are a dog's breakfast, and do not go to the root of the problem which is not principles, nor practice, but conflict of interest.