It seems as though every time a company goes into administration the media turns the spotlight on the accounting industry. There are an increasing number of calls to raise a Chinese wall between tax services and audit departments to enforce a strict separation of the two areas.
The rising number of accounting scandals and the drive for change wins it a spot on this year's Global Tax 50.
Donald Brydon, who is conducting a review of the UK audit industry, said he was worried about the audit debate in the UK turning ugly following high-profile scandals over the past year.
"I'm a little troubled by the current mood that reaches for the shotgun aimed at auditors every time there's a corporate problem," Brydon told the press earlier in the year.
"Audit needs to be an attractive profession that attracts the brightest and the best who can have confidence that a good piece of professional work will not be mis-described in times of stress," said Brydon.
Since the collapse of Carillion in early 2018, there have been multiple scandals all over the world, including the US, UK, South Africa and India. Therefore, the problems cannot easily be written off as exceptional cases.
Many tax professionals feel there is an expectation gap between what the public wants from audits and what the accounting industry can deliver. One board member at a major international firm suggests this is a fundamental part of the problem.
"The man in the street expects two things from an audit," the board member tells ITR. "Firstly, the audit has to pick up on any sign of fraud in a company, and the audit also has to be able to guarantee that the company will not fail. But audits often can't do either of these things."
"There's no way of guaranteeing a company won't fail," says the board member. "Companies rise and fall, that's capitalism."
At the same time, there have been calls to go much further and even break-up the Big Four accounting firms to make the market for audit contracts more competitive. Mid-tier firms like BDO and Grant Thornton have come out in favour of greater regulation to open up the market.
On the other hand, many companies contract two firms to handle each area in separation, but this has not prevented scandals. It's debatable whether further separation will produce greater audit quality and higher standards of corporate responsibility.
"I don't think there's enough choice, but there is really cut-throat competition in the audit market," the board member says. "The firms are competing hard against one another, not just for the FTSE 50 clients or even the top 100, but for the FTSE 350 contracts as well."
"The competition in the UK is not being driven by price differences," they continue. "Unlike in the rest of Europe, we compete on quality not by price."
However, some accountants have become harsh critics of the industry to which they belong. Such critics want to go much further than audit rotation and restrictions on tendering.
Prem Sikka, who chaired the independent investigation into the audit market, wants to see wholesale reform of the entire industry. "The real problem is that the audit market is not a normal market," Sikka says. "The state guarantees the market, and the accounting firms often help design the very standards they are being held to."
"Auditors should be focused on auditing alone," he adds. "There should be no consultancy role or tax advisory role. The auditing service should be completely ring-fenced from everything else. I'd like to see separate legal structures."
Several firms have made a point of offering just tax advice. Many such firms began as boutiques before developing a global network or association. However, it's unlikely these firms will displace Deloitte, EY, KPMG and PwC.
Despite the scandals, the multidisciplinary model will persevere because it offers large-scale businesses what they need in a few packages. This is why most public companies will go to one Big Four firm for tax advice, another for audit and maybe even a third for consulting.
What is certain is that the business community is likely to see more accounting scandals in 2020 and more calls for reform will follow. There are still obstacles in many countries to reform, yet there is a growing demand for change.
