Two Parliamentary committees, both headed by right-wing Labour MPs (Frank Field and Rachel Reeves) have called the UK’s big four accountancy firms to be referred to competition authorities for potential break-up.
Investigating the collapse of Carillion, which made its bosses millions from taking on outsourced contracts, the MPs found that the firms supposed to audit (check) the firm’s figures were a “cosy club incapable of providing the degree of independent challenge needed”.
The government, regulators and Carillion board members had often acted “entirely in line with their own personal incentives”, and the auditors had provided no check.
Breaking the firms up into smaller similar ones — a recipe also proposed for banks by some politicians after the 2008 credit crash — however, addresses none of the real problems.
After the scandal in 2001, when the giant US energy-trading company Enron collapsed and was found to have cooked up $100 billion in spurious revenues, the accounting firm which audited it, Arthur Andersen, was broken up.
Bits of it were bought by other big firms. Other bits set up as new firms. Nothing much gained.
We need, instead, workers’ audits of these giant profiteers. Trade union representatives, with the aid of a public audit service providing technical expertise but not dependent for revenues on getting the custom of those whom it is supposed to scrutinise, should have access to all the company’s books.
They would surely have stopped the Carillion bosses siphoning off millions by artificially over-reporting revenues, and then slipping away just before the reckoning came.