They say there is strength in numbers, and for accountancy firms, an industry strong with numbers, this is true. According to In The Black, Several Australian accounting firms have announced mergers and market players say many more firms are holding talks. In doing so, they hope to better adapt to industry changes, support their clients and staff, and manage succession planning, claims the article.
However, the idea of unity does not look promising for some of the UK’s industry leaders. In fact, UK lawmakers have proposed a ‘Structural Break-Up’ of big four accounting firms, reports The Wall Street Journal. The article states that The Business, Energy and Industrial Strategy Committee proposed to divide the audit and consulting business units of the Big Four accounting firms into separate legal entities. The aim is to ensure that audit work is no longer subsidized by the firms’ other business, designed to help tackle conflicts of interest.
“We are not confident in relying solely on the integrity of auditors to do the right thing in the face of conflicting interest,” states the UK Parliament committee, according to The Irish Times. “For the big firms, audits seem too often to be the route to milking the cash cow of consultancy business.”
This will have a huge impact on the global accountancy industry as the UK is number one in the world for financial and related professional services exports. Canada and the US, along with Australia, are likely to see more business as a result, but will this create a similar problem further down the line in these countries?
We spoke with Catherine Dahl, CEO of Beanworks, who said “Whenever industries become an oligopoly like accounting firms, it is bad for consumers. It can erode trust and lead to corrupt practices. It is not clear that is what is happening, but there are have been signs out there.”
She adds: ”Canada is not immune to the impact of this. More importantly, what will have a bigger impact on breaking up the oligopoly in large enterprise or IPO company Audit/Accounting services firms is AI and audit automation. This will impact all countries and will be a good thing for all consumers.”
If the division does take place, it will be an insightful case study and a valuable lesson which could shape the global industry. If it is a success, we could see other countries mimicking this tactic, or if it fails, perhaps the methods advocated by Dahl will be necessary.
Disclosure: This article includes a client of an Espacio portfolio company