If you asked the average Jo what they understood by the phrase 'auditing companies', frankly they wouldn't have a clue what you were talking about. If you put the same question to the Government they would probably get the shiny new idea they have for the process out of their bag and look proudly at it. Someone in Whitehall has come up with the notion of 'managed shared audits' of FTSE 350 businesses, and you can see their reasoning.
Audit companies haven't covered themselves in glory in the past few years and there are enough legal actions in and around the courts, with big numbers ascribed to them, to have piqued the interest of the popular press. The Government decided to intervene by way of a white paper from the business department, and their big idea is that when one of the 'Big Four' work on the audit of a FTSE company they should be accompanied by their (younger adopted) brother, to work alongside them to check the accuracy of a company’s accounts. This is tantamount to Lewis Hamilton having his sister tag along in a sidecar during a race to keep an eye on his gear changes. He'd be thrilled.
It was interesting to read in the press this morning (Thursday 27 May) that BDO and Grant Thornton, the largest accounting firms in the UK after the Big Four, are considering not pitching for work on shared audits of FTSE 100 companies, according to people briefed on their stances. This position is less surprising when you consider that the 'Almost as Big 5 and 6' earn more UK audit fees in aggregate than the next 14 challengers combined.
"We are enormously keen," said a senior assistant in the accounting firm Leadbetter & Slush of Mansfield, "when Janie returns from maternity leave she would be keen to work with EY on the audit of British Airways. Her uncle owns a light aircraft, you know."
To place this into a little more perspective, the Big Four currently audit the entire FTSE 100 and more than 90 per cent of the FTSE 250. There are two Government plans this morning:
1 A FTSE 350 company would have to hire a smaller accounting firm to carry out 10 to 30 per cent of its audit alongside one of the Big Four, which would have overall responsibility. This consultation is out until July of this year.
2 To lure Dominic Cummings into a dark alley and explain the afterlife to him on an experiential basis.