Earlier this month, I predicted August – as it often turns out to be – would be rather slow for news. This, I hoped, would give me plenty of time to ease into my new editorial role, which I’ve partially taken over from my dear friend and mentor Arvind Hickman, since his recent move to pastures new.
In my three years at International Accounting Bulletin, August has always been quiet, with very little activity in the professional services market.
Soon enough, however, it became apparent this was no typical August as, in the past few weeks, several important news stories broke. Just to name a few: Deloitte’s alleged involvement in assisting in the concealment of Standard Chartered Bank’s transactions with Iranian clients, KPMG UK announcing a 3% cut in its workforce, rumours of a BDO UK takeover of PKF, PwC UK facing an accounting watchdog investigation into its work at RSM Tenon, and evidence emerging from the Competition Commission revealing serious friction between the mid-tier and the Big Four. Not an easy first month for a new editor.
Additionally, in early September we are to see the release of the long-awaited draft report on the audit policy proposals by the European Parliament’s Legal Affairs Committee, commonly referred to as Juri.
The profession appears, potentially, to have reached a once-in-a-generation tipping point, and several changes could take place in the coming months.
Since I first started reporting on the industry, the amount of regulation or proposed regulation discussed has risen dramatically.
Firm leaders around the world used to tell me their major concern was the growth of their businesses, but this has recently been usurped by the potential effects of upcoming regulation.
Whether a Big Four member or a small market player, regulation is likely to change everyone’s way of doing business. Regulators are also challenging the role of the auditor, as they try to address the expectation gap.
Whether regulation is the best solution for the industry is still unclear and perhaps the leap from being a mostly self-regulated industry to one that encourages criticisms and reforms has been somewhat sudde.
The message, however, coming from many governments and watchdogs has been that retaining the status quo is not an option. It’s not only the profession in Europe that’s under scrutiny and awaiting regulation.
Firms in India could also be subject to reforms such as mandatory firm rotation and restrictions on auditors offering non-audit services.
In China, the government has enforced strict localisation rules on the Big Four and our reporter spoke to several stakeholders about the effects of the government’s orders to place the control of large firms into the hands of Chinese CPAs.
Globally, the profession is being challenged, and while some are taking a ‘wait and see’ approach, others appear more proactive.
The Dutch government, for instance, is thinking of legislating for mandatory audit firm rotation and restricting the offering of non-audit services before the outcomes of European Union audit reform are announced. Could the Dutch be jumping the gun on this?
With autumn approaching and politicians and firm leaders returning from holiday, more news will be filling my inbox and, if I’m allowed another prediction, I think this might be a time that the profession will remember for some years to come.