Jim Duffy comment: Investigating the intriguing case of the Big Four

We have let Inspector Clouseau run the auditing departments, says Duffy. Picture: contributed.
We have let Inspector Clouseau run the auditing departments, says Duffy. Picture: contributed.
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There is nothing better than a good whodunnit.

A detective character sniffing out the wrong-doing and bringing the culprits to justice. I did enjoy a good old Taggart. It was always fun to guess who the villain was, while watching DCI Matt Burke getting his knickers in a twist, in order that justice may be done and be seen to be done.

Burke was professional, totally dedicated and fearless in his approach to investigating crime. However, it appears in today’s auditing world that the detectives are bit more Inspector Clouseau than Burke.

In the week when the “Big Four” are again in the spotlight regarding their audit competence, is it not time to re-define what audit actually means and does?

A quick Google search of the term “audit” reveals the following. “An official inspection of an organisation’s accounts, typically by an independent body.” Other synonyms of the term “audit” throw up words like probe, vet, evaluate and scrutinise. So, there would appear to be a bit of the detective theme going on. To be fair, that is what I believed to be the case and probably so did you. But, not so.

KPMG, the accounting firm and one of the Big Four, has been found wanting by the industry regulator. KPMG signed off the books in the years leading up to the monumentous collapse of Carillion. But, rather than single out KPMG here, is it not time for us to re-define the remit of audit and get back to basics?

After all, the Big Four all gave Carillion financial advice before the construction and outsourcing company failed. Certainly, MPs have accused the four of “feasting” on Carillion, but perhaps we have allowed this to take place as we simply trusted accountants a little too much. Thus, we have let Inspector Clouseau run the auditing departments.

So what would DCI Matt Burke do? He would get his team of Glesga detectives around a white board and forensically examine why auditing has failed the companies it was supposed to audit and us the tax payers. He would consider the purpose of auditing and who benefits. And he would have an avenue for investigation.

Who benefits? Well, there is no doubt that the Big Four have been benefiting to the tune of millions of pounds. This dependency has to be turned upside down. But, maybe Burke and his team would want to consider the relationship between auditor and client. It’s a business relationship. And this is where it falls down.

The one great virtue about HMRC is that it is independent and acts for one boss. The Treasury wants to collect as much money as it can, as fairly as it can within the law and with no bias. After all, who can say that they pick up the phone to the tax man for a chat on business-development?

Who takes the tax man out for big steak diners and expensive nights out? No-one, right - as the tax man would then make sure that your entertainment receipts and accounting were scrutinised so as to be correct. But, the Big Four it seems are too “buddy buddy” with the companies they are supposed to investigate.

Herein lies a big win for Burke’s investigation team. On the one hand, the Big Four audit teams are embedded with clients, while offering “consultancy” services to the same clients. This simply does not compute and the accrual is that business-development and additional profit-making is more important than the work at hand - auditing.

Let us consider this. Who would you rather investigate for you when something doesn’t quite add up? The audit departments of one of the Big Four, who it seems will “feast” on as much as they can, while churning some numbers in a pre-approved format that spits out a lengthy report than does not truly reflect what is going on?

Or DCI Matt Burke, who will complete a thorough investigation in a non palsy-walsy fashion that leaves the suspects vulnerable and ready to confess… Is it not time to give the audit departments real teeth unencumbered by the need to make money as opposed to doing a great detective job?

Jim Duffy MBE, Create Special.