Please ensure Javascript is enabled for purposes of website accessibility
January 29, 2023

Michel Barnier: The Big 4 Audit Model Is a Failure

Okay, those weren’t the EU financial services commissioner’s exact words but you get the sincere impression that he’s had it up to his silver coif with how things are going.

“The crisis highlighted failings in the audit sector,” Barnier said today. “These need to be explored and we need to see what improvements can be made. I believe it is important to approach this discussion in a frank and open manner. No subject should be taboo.”

Right! No subject is off limits. So what will be discussed? Well, for starters this Big 4 thing has to stop. The Telegraph reports, “If one of the Big Four – PricewaterHouseCoopers, KPMG, Deloitte and Ernst & Young – were to collapse the Paper suggests it could create systemic risk for the financial markets.”

Secondly, the notion of independence and “putting shareholders” first is a sham. ‘Berg reports:

Restrictions on auditor choice may reduce “distortion within the system” caused by auditing firms acting in the interests of their clients rather than shareholders when compiling reports on a companies’ financial health, the commission said in a report outlining possible measures.

[…]

The commission said it’s also considering rules that would force companies to change their auditing firms after a fixed period of time.

Forcing companies to rotate their auditors would “enhance the independence of auditors” and “operate as a catalyst to introduce more dynamism and capacity into the audit market,” the commission said.

Lastly, can a Frenchman get some choice up in this mofo?

The top four accounting firms have a market share of about 90 percent in the majority of EU member states, according to the commission’s report.

“The market appears to be too concentrated in certain segments and deny clients sufficient choice when deciding on their auditors,” the commission said.

Barnier isn’t asking for a full-blown cafeteria but for crissakes, the choices right now are chicken, chicken, and….chicken. Sure, they might have slightly different recipes (e.g. KPMG a little spicy/sweet, PwC is in a cream sauce) but it’s all chicken. And Barnier HATES chicken.

Companies May Lose Right to Pick Auditing Firms Under European Union Plans [Bloomberg]
EU markets chief Barnier plans radical overhaul of audit industry [Telegraph]

Okay, those weren’t the EU financial services commissioner’s exact words but you get the sincere impression that he’s had it up to his silver coif with how things are going.

“The crisis highlighted failings in the audit sector,” Barnier said today. “These need to be explored and we need to see what improvements can be made. I believe it is important to approach this discussion in a frank and open manner. No subject should be taboo.”

Right! No subject is off limits. So what will be discussed? Well, for starters this Big 4 thing has to stop. The Telegraph reports, “If one of the Big Four – PricewaterHouseCoopers, KPMG, Deloitte and Ernst & Young – were to collapse the Paper suggests it could create systemic risk for the financial markets.”

Secondly, the notion of independence and “putting shareholders” first is a sham. ‘Berg reports:

Restrictions on auditor choice may reduce “distortion within the system” caused by auditing firms acting in the interests of their clients rather than shareholders when compiling reports on a companies’ financial health, the commission said in a report outlining possible measures.

[…]

The commission said it’s also considering rules that would force companies to change their auditing firms after a fixed period of time.

Forcing companies to rotate their auditors would “enhance the independence of auditors” and “operate as a catalyst to introduce more dynamism and capacity into the audit market,” the commission said.

Lastly, can a Frenchman get some choice up in this mofo?

The top four accounting firms have a market share of about 90 percent in the majority of EU member states, according to the commission’s report.

“The market appears to be too concentrated in certain segments and deny clients sufficient choice when deciding on their auditors,” the commission said.

Barnier isn’t asking for a full-blown cafeteria but for crissakes, the choices right now are chicken, chicken, and….chicken. Sure, they might have slightly different recipes (e.g. KPMG a little spicy/sweet, PwC is in a cream sauce) but it’s all chicken. And Barnier HATES chicken.

Companies May Lose Right to Pick Auditing Firms Under European Union Plans [Bloomberg]
EU markets chief Barnier plans radical overhaul of audit industry [Telegraph]

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

candles

An Audit Associate at KPMG’s NYC Office Has Died

I debated even posting this at all but everyone is already talking about it and maybe it will encourage someone reading it to get help if they too are struggling. On Thursday, a recently-hired audit associate working out of KPMG’s New York City office at 345 Park Avenue committed suicide. There appears to be just […]

scissors

EY Germany Gives 40 Partners and 380 Staff the Boot to Boost Profitability After That Whole Wirecard Thing

EY has been tightening the purse strings over the past several months ahead of the big Project Everest split, the vote on which remains delayed and should happen before the end of this quarter. The firm did not hand out mid-year bonuses in December and sources say that travel, training, and even hiring are on […]