The Committees are today publishing the responses to
the Carillion joint
inquiry report they invited on 22
May - ahead of a debate on Carillion in the
Commons this afternoon.
The Big 4’s responses reveal some of their thinking about the
proposed CMA review of the UK’s audit market (the special report
includes a brief response from , then incoming chair of
the CMA), following reports this week that they have been asked
by the CMA to provide it with “non break-up” options, and that
the Bank of England’s Prudential Regulation Authority is mulling
blocking Goldman Sachs’ attempt to appoint an auditor outside the
Big 4.
The FRC’s response sets out some details about its investigation
into “the audit of the company and the conduct of two of its
accountants who fall within the scope of our remit”, highlighting
the issue which has become apparent also in its recent report on
BHS: that no matter who provides the financial information and
statements to be checked by auditors, their conduct can only be
investigated if they are a qualified accountant. Their response
also suggests that, unlike the case of BHS and PWC, they do not
expect any wrongdoing they find to be admitted: “Once the
investigations are complete, the FRC Executive Counsel will
determine whether the legal threshold is met to bring
disciplinary proceedings. As matters stand it should be expected
that if proceedings are commenced, they will be contested.”
The ICAEW Chief executive Michael Izza repeats the position he
expressed on the Today programme the day the committees’ Carilion
report was published: “If we do not … [learn and apply the
lessons from Carillion in ways that will help sustain public
trust in audit and confidence in business] … we will not have a
profession worthy of the name in the UK in twenty years’ time”
Rt Hon MP, Chair of the Work and
Pensions Committee, said: “Once again, the
fingers are out pointing everywhere but here. The Big 4 admit
there is a problem but insist their break up is no part of the
solution. How the CMA deals with the lack of audit competition
will be the sign of whether the new chairman is able to break
this existing culture and impose a new one which makes clear that
his organisation is about delivering for individuals, and not for
cosy oligopolies. Business as usual brought us Carillion. It is
bad for the good business that is the lifeblood of our economy,
for workers, and for pensioners. We’ve learned the lessons, get
on with it.”
MP, Chair of the BEIS
Committee, said: “Carillion’s collapse was a
corporate disaster and the architects of its failure were the
company’s directors. As a PR exercise they weakly told the
Committee that they took responsibility for the company’s
collapse but sought to blame everyone but themselves. Now, when
given another opportunity to face up to the responsibilities for
which they were so well remunerated, they again wriggle out of
accepting culpability.
“Even the Big 4 have started to recognise that business
cannot go on as normal, with investors losing faith in the
accounts, a woeful lack of meaningful competition, and consulting
and auditing relationships that are far too comfortable for the
public or investors to expect any real challenge. The CMA needs
to closely examine the audit market and as a Committee we will be
keen to see what remedies are proposed to fix the broken audit
market.”/ENDS
Full information on the inquiry and ongoing evidence and news can
be found here: Carillion joint
inquiry
