Kwasi Kwarteng’s newly proposed audit reforms have come under fire with accusations including the stifling of businesses and their growth. From personal liability for corporate reporting to with new, UK definitions of “public interest entities” the proposals have been critiqued by many for stifling the growth of smaller firms with overburdensome regulation.

Instead of disrupting the sector and encouraging more competition, it is likely to make competition more difficult for the mid-sized firms that have begun to compete in a truly unprecedented manner over the last year and a half.

A shake-up is long overdue, however, following scandals surrounding Pâtisserie Valerie, Thomas Cook, and Carillion due to conflicting interests arising from current Big Four dominance in the sector. Reflecting this, Kwarteng’s proposals include the diversification of audits and professional services to include mid-sized firms, supporting their growth to eventually compete with the Big Four. While this has been critiqued for not having been tested to see if these firms can keep up and to ensure larger firms are willing to comply with these collaborations, mid sized firms such as Theta Global Advisors have already seamlessly begun this process.

Supportive structures for smaller and mid-size firms can 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.

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 quality risks, skills shortages, and resource shortages for firms outside of the Big Four performing particularly complex and demanding audits are in some ways to be expected. However, these risks can be managed and mitigated with appropriate structures to facilitate a growth period as these smaller firms gain more experience and resource 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 supportive structures working with the Big Four can see more mid-sized firms such as our own seamlessly diversify the sector, maintaining London as a top choice globally for professional services and are essential to stay ahead of the curb moving forwards.”