The Big Four have come out again criticising proposed changes to UK professional services, particularly in their lack of support for shared audit proposals in order to break up the oligopoly of the Big Four in the sector. Leaders amongst the Big Four have said the proposals could result in doubling down on work, increased costs for business, and a failure to improve the standards which were in large part why reform has become so prevalent on the financial secretary’s agenda. Accounting and consultancy disruptors, Theta Global Advisors have seen immense success with previously inaccessible large clients, and offer their insight.

A shake-up is long overdue. Following scandals surrounding Pâtisserie Valerie, Thomas Cook, and Carillion due to conflicting interests arising from current Big Four dominance in the sector, diversification of the sector is absolutely essential. However, while diversification is necessary, are shared audits the answer or would caps on the number of audits the Big Four can undertake from FTSE 100 and FTSE 250 companies suffice?

Supportive structures for smaller and mid-size firms may allow for the continued, seamless disruption of the sector, improving standards and removal of problematic conflicts of interest in the process. Indeed, a lack of auditor-independent advisors now may leave far too few options as businesses begin to see the need for new professional service firms. However, many smaller firms have taken on these previously accessibly, large clients for their audit and professional service needs without shared audits, seeing great success suggesting that shared audits may not be the be all and end all here.

Chris Biggs, partner at Theta Global Advisors has been leading by example at his firm. Theta provide accounting and consultancy services and deliberately do not audit companies to avoid any conflicts of interest, an approach Chris is keen to see applied across the professional services industry to maintain higher standards in a rapidly changing sector.

Chris comments on the disruption of the Big Four’s monopoly and how auditor-independent advisors such as Theta have already successfully begun this diversification of the sector, having worked on major accounts this year:

“The potential issues around this shake up have been made clear but that is no reason to shy away from much needed reform. Possible increased costs and time delays for firms outside of the Big Four performing particularly complex and demanding audits are in some ways to be expected should shared audits be adopted. However, these risks can be managed and mitigated with appropriate structures to facilitate a growth period as these smaller firms gain more experience and resources when working on such projects.

“There have been three independent reviews so far and major failings are still happening with the Big Four’s current monopoly, now we are seeing yet another failure occur surrounding Carillion’s liquidation and Silentnight’s sale. The new minister coming in has certainly re-energised the push, but we need to now see more action.

“Independence of the Big Four’s audit and consultancy services is crucial. We cannot risk jeopardising the independence of the audit because of lucrative consultancy services provided to the same client. Almost as important as this is the issue of ‘perception’, the public must have the perception that the audit role if fully independent and impartial at all times, otherwise they will lose confidence in the market.

“At Theta Global Advisors, we do not audit and hence, we are one of the few truly independent accounting advisory firms for non-audit services. Mid-sized firms such as ours that are disrupting the industry in a truly unprecedented manner are seeing great success having worked on major accounts this year. Kwarteng’s proposals for shared audits working with the Big Four is just one way we can seamlessly diversify the sector, with mid sized firms having shown they can take on previously inaccessible large clients throughout the pandemic already. For London to continue as a top choice globally for professional services, it is essential to stay ahead of the curb moving forwards, be that through shared audits or caps on the Big Four’s current monopoly.”