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Jeremy Newman: See? I Told You That There Were ‘Big 4 Only’ Clauses

BDO Global CEO — and infrequent blogger — Jeremy Newman would like everyone to know that he wasn’t dreaming when he stated that some financing agreements included “Big 4 only” clauses.

Apparently Newman was thought to be a little Patrick Byrne-ish on this particular point:

These are views that I have been expressing for some years, although many have questioned the prevalence of such clauses and indeed some have sought to deny their existence.

It was comforting therefore for me to read in the report published by the UK’s Financial Reporting Council in October 2009 entitled ‘Choice in the UK Audit Market’ that reference was made to restrictions in loan covenants. The report from the FRC noted:

‘..it is too early to determine how widespread such obligations are; however, the FRC continues to receive examples of banks imposing loan covenants with ‘Big 4 only’ clauses, including one which imposed a higher rate of interest if the borrowing company chose a non-Big 4 auditor.’

Surely there is now sufficient evidence to recognise that such clauses are a potential constraint on choice in the market place and regulators should be urged to ban them.

So despite the lack of evidence that these obligations are widespread, this remains a matter of “urgency,” according to Newman. There are examples, people. That should be enough for you. The man is trying to build a Global 6 firm after all. Kindly throw in a little additional bank regulation to help him out.

Nightmare Client of the Day: Lady Gaga

Lady Gaga.jpgAs you are all aware, there are some hella-suck clients out there for accountants. Demanding clients, unorganized clients, asshole clients, etc.
Then there are the clients that just don’t give a damn about how much money they may be throwing around.
Today’s example is none other than Lady Gaga and the nightly extravaganzas she puts on.
For some reason LG strikes as the sort of client that would show up with all her receipts in shoeboxes but in her case, there would be hundreds of shoeboxes and they’d all be fabulous.

The ‘Bad Romance’ singer – who describes her stage show as “ostentatious and over-the-top” – is making a heavy loss every night she performs on the North American leg of her ‘Monster Ball Tour , which has so far overspent by £2m (€2.2m) even though every concert is sold out.
The massive costs have been run up by her elaborate stage design, costumes and props, including the giant bath she used while making a promotional appearance on UK TV talent show ‘The X Factor’.
A source said: “The concerts are losing money hand over fist because they’ve spent a fortune on pricey costumes, technical equipment and elaborate set designs. She spent £500,000 (€550,000) on one stage alone.
“But Lady Gaga gets what Lady Gaga wants. Her wardrobe is huge and she wants to shock – and that costs serious money.”

There are many — including our friends at Fashionista — that say the woman is an “utter genius” and that genius simply cannot be denied.
Fair enough but accountants, being the practical creatures that they are, would not stand for such irresponsible behavior. From the sounds of it however LG’s accountant seems to accept the notion that the woman is an artist, bottom line be damned.
If you’ve got ideas on how to keep her spending under control, we’re all ears but personally, if she walked up to us (sans pants naturally) we’d have a helluva time saying no.