Page 4 - Auditors Article

The last decade has witnessed unrelenting criticism of how

accounting firms and in particular the ‘Big Four’ auditors (PwC,
KPMG, E & Y and Deloitte) who sign off 98% of the FTSE 350

index [Stittle, J, 2018) and collect 99% of audit fees [Sikka, P 2019,
Financial Times, 3, 2019, Weavee, 2020] have come under increasing
amounts of scrutiny over financial reporting standards.

Accounting and audit failures periodically turn the spotlight on

a range of problems with the industry, and the audit of large

companies in particular. Key problems include:

• Lack of competition: the ‘Big Four’ accountancy firms

dominate the market and they are ‘too few to fail’.

• Conflicts of interest: auditors can be caught between
the interests of the company’s management, their own

interest, that of their firm and their duties as auditors.

• Poor quality and inadequate purpose: too many audits
are found to be wanting by the regulator and fail to meet

wider expectations.

• Weak regulation and supervision: the regulator lack
resources, powers and independence.

• Lack of prudence in the accounts: accounting

standards have evolved in a direction that permits or

encourages less prudent accounting. At the same time,
compliance with the laws that demand prudence in the

payment of dividends and protect the company's capital

is patchy. [17 House of Commons Library, 2019]