KPMG, and the other big 4 accountancy firms are accused of contributing to the Carillion and BHS scandals. Image: KPMG London office. Håkan Dahlström Photography via Flikr. Some rights reserved/CC0.
The ‘Big Four’ accountants - an oligopoly if ever there was one as Bill Michael of KPMG has freely admitted - are charged with lowballing statutory audit services to major companies in the UK in order to gain much more lucrative advisory work. As a result (it is said) the audit work is done poorly and this has contributed to the series of scandals such as Carillion and BHS. What is more, it is also said that the 'Big Four' have little incentive to give the sometimes necessary bad news to their client (and therefore the market) for fear of losing the tasty advisory work for which the statutory audit has provided such an unappetising entrée.
So unattractive is it to be a player in the statutory audit market for FTSE 350 companies that a fringe competitor to the 'Big Four' (Grant Thornton) has actually pulled out of it recently citing the impossibility of making it pay. Unsurprisingly in these circumstances the government has now taken action and the Competition and Markets Authority (CMA) will revisit this classic case of market failure for which it failed to come up with any effective remedies but five years ago. With the much criticised Financial Conduct Authority (FCA) also carrying out a separate investigation on the regulatory side, it is fair to say the 'Big Four' are getting serious attention from regulatory authorities.
