Reform Is originating for that Big Four Consultancies: Can they E

Company accounts are far more significant than we provide them with credit for. If businesses do not have accurate accounts, they cannot be trusted. Accounts are the foundation which credit deals, business decisions and corporate reputations are built.

Never mind individual companies – if trust in audit processes collapses, the economy goes with it. There are many countries where dishonesty may be the norm – and they are not symbolic of successful business. In a nutshell, auditors may not be terribly sexy, but they're very important.

However, the Big Four auditors happen to be letting all of us down while building their very own mega-businesses. Radical reform of the auditing profession is now inevitable, long overdue and really should be welcomed. The Big 4's oligopoly of the largest audits – last year these were responsible for basically eleven of the FTSE 350 constituents – is under particularly close scrutiny.

Unchallenged dominance brings lethargy and bloat. Deloitte, KPMG, EY and PwC would be the Henry VIIIs of auditing. They're accustomed to being applauded simply for existing. They've built a joint brand on seeming unassailable – a picture that their equally giant courtier-clients are quite happy to propagate – and they've been wallowing in it for so long they no more want to bend towards the needs of others.

It's also an oligopoly built on mutual dependence. They require each other to maintain a facade of competition. It's ironic that although the Big Four bask in notoriety, the Government gets itself right into a flap over the anti-competition vices of tech giants like Facebook, Amazon and Google. Those companies might be creeping into every aspect of our private lives, the Big Four have done exactly the same and arguably more successfully. Why must the regulators feel any different about this? Just because there are four names in the ring does not mean it isn't a closed circle.

Shared blame

One of the major problems has been that the Big Four's clients have been content not to be questioned too closely about their financial accounts. They have been more than happy to part with fat audit fees to possess them signed off by a big, prestigious auditor. Historically, this was seen to be great for the look, but not anymore. Such relationships have resulted in neglect, complacency, failure and, ultimately, huge loss of track record of all the parties involved. The stop by standards has been driven by arrogance.

This is a classic of the genre 'business leaders caring concerning the wrong things. It's ridiculous that the particular brand stamp around the accounts should be valued higher than accuracy and quality. When organisations focus on flashy status symbols – whether that's using the CEO's mansion as loan collateral, jumping into an IPO prior to the company is ready or cosying as much as the largest accounting fish within the pond – the business always suffers in the end. Short-term growth isn't any replacement for long-term sustainability. Who waits wins.

The upshot would be that the Big Four's colossal girth isn't just bad for the accountancy market and also the economy in general – it's bad for individual companies, luring them into bad practice in return for a pat around the head.

Legal response

We are beginning to see top of the echelons awaken to the problem, albeit slower than one would hope. Rachel Reeves MP, chair from the Making money online and Industrial Strategy Committee , recently launched her report into the future of audit towards the ICAEW by which she referred to “incompetence, obfuscation and often fraud” – scathing words, indeed. She referred also to 27% of audits being 'below standard'.

These are the canaries within the mine. We'll hear more politicians obtaining the theme as the run-off from the Big Four's business model grows and more potential fraud involves light. The question is, the way nokia's react?

The best option would be to change with the times. There is no shame in sensing the direction from the market and pivoting to stay in front of the game – in this instance, by releasing your stranglehold around the FTSE 350. It hurts for the short term, but it guarantees your company in the long run.

The day-to-day effects

Not it's likely to cut much ice within the boardrooms from the Big Four, there is also a broader need for reform. The main city that might be unlocked towards the market if they reduced their dominance would be like rain on the dry field – the accounting, consultancy and finance sectors would be given an enormous new take on life.

A simple start would be to say that the Big Four could only have no more than around sixty audits each of the FTSE 350 companies – that would spread things around and force some of the smaller FTSE 350 companies to seek the services of other audit firms. Two years later, the number of these audits that may be conducted by the Big Four might be dropped to forty each and so forth.

This would force more efficient competition and provide the underside half of the top ten an incentive to purchase technical departments, or club together and put more money to the ICAEW, knowing that they'd have more work than they're currently able to snag. At present they do not invest in audit services for larger companies because they see little or no return on it because of the Big Four's oligopoly. That should change.

In a nutshell, trustworthy auditing is a valuable part of the way we do business. Change will need to arrived at the present oligopoly from the Big Four. It would be advisable for them to instigate it – otherwise, in the long run, it will sweep them.