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House Of Lords Report Attacks 'complacency' Of Big Four Auditors In Financial Crisis, Urges Competition Investigation

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8415860/House-of-Lords-report-attacks-complacency-of-Big-Four-auditors-in-financial-crisis-urges-competition-investigation.html

A report by the upper chambers' Economic Affairs Committee said PwC, Deloitte, Ernst & Young and KPMG dominated the UK audit market for large companies.

In 2010 they audited 99 of the companies in the FTSE 100, which on average only change auditors "every 48 years".

"It is clearly an oligopoly with all the attendant concerns about competition, choice, quality and conflict of interest. It gave no warning of the banking crisis," said the report, published on Wednesday.

The committee called on the Office of Fair Trading to open a detailed investigation into the audit market with a view to a possible inquiry by the more powerful Competition Commission.

There's clear conflict of interest as I bet if you find serious issues and report it the following year you probably won't get the account and the work. Although if the company only gives you the figures it wants you to audit how are they meant to find discrepancies?

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I once dealt with an auditor from Deloitte at a local government client where I'd put in the HR system

There was a statistic they wanted to show the amount of days off sick per employee.

The HR system recorded sickness and I used Business Objects to get the information out.

I then ran the report and he spent the next 2 full days asking me very annoying questions about exactly how it was set up, how the HR system worked, when it was due for replacement etc etc.

However many times I told him a report could only be run in a certain way if the data is actually in the system (e.g if their wasn't a field in the db that recorded someone popping home with a headache and then coming back in later and then leaving again then I couldn't cover that eventuality in my report)

He eventually signed off on my report - it cost the council 2 x his day rate and 2 x my day rate - and lo and behold the council soon received an invitation from Deloitte to see if they'd be interested in consultancy on HR systems!

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ah - volunteering information eh? Always good to muddy the waters ;)

(that was @Timak - thanks for the link Tonk)

Edited by RichB

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The banking crisis was widely predicted by many, including plenty of people on here. Nobody took any notice because they were too busy collecting fees, this applies to the banks, auditors, ratings agencies etc.

If management want to hide something from the auditors, its pretty easy to do and happens in most cases to a greater or lesser extent.

In defence of the auditors, if they were valuing the banks dodgy loan book, and they could see the loans, repackaged into whatever form being actively traded, then they have a price point to value the loans at. Anyone investing in a company should know that values can go up and down, and the balance sheet is just a point in time.

I am an ex big four auditor by the way, and now sit on the other side of the fence. They represent very poor value for money, a bit like most of the financial services industry.

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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