Betrayal is defined as “the action of betraying one’s country, a group, or a person…” Now, there is no doubt most people would say I am being extreme when using betrayal to define the unethical actions of Big 4 accountancy firms (KPMG, PwC, Deloitte & EY)  and they would probably be right. However, when articles continue to be released mentioning yet another unethical act by a big 4 UK accountancy firm, I do start to feel they are betraying the UK, accounting profession and us, as individuals.  

Looking back to 2018, the largest accounting scandal in recent UK history was that of Carillion, whose accountants were KPMG. One part of an auditor’s role is to determine whether a company is a going concern, i.e. whether a company will be able to continue to trade within 12 months following the accounts being signed off. KPMG decided owing £1.3bn to banks, having an £800m pension deficit whilst only having £29m in the bank was not a going concern issue, and Carillion’s accounts were given a clean bill of health. Only nine months later, Carillion collapsed. [1] 

KPMG have still not been penalised for this by the way. Early last year there were multiple statements released stating KPMG would be fined £250m by the Financial Reporting Council (FRC) for this “error”. However, considering the highest ever fine was £15m to Deloitte following some serious failures in the Autonomy audit, it was never going to reach the £250m. Unsurprisingly, on the same evening as Boris Johnson announced Pfizer and AstraZeneca vaccines reduced the risk of death from Covid-19 by 85% in a press conference streamed live around the UK on 18 March 2021, another statement was released albeit much more muted, which stated the KPMG fine for the huge failures during the Carillon audit is now “a whopping £25m”. With the settlement agreement likely to run into 2022, this fine could reduce even further, “whopping” indeed. [2] [3]

On the same day of Boris’ vaccine announcement, another accountancy-based announcement was made (exciting day for me!). The government announced plans to “break up the dominance of Big Four firms”. There were multiple striking comments released by the government such as ‘restoring confidence’, ‘need for modernisation’ and ‘positive steps’. Looking back 13 months to 27 February 2020 from that announcement, a statement was released by the FRC stating plans had been outlined to “Break up the Big Four accounting firms”. 12 months prior to that, a UK parliament committee stated the Big Four should “legally separate”. Come back in 2022 and there will likely be another statement repeating the same thing. [4] [5] [6]

The Big Four are not the only accountancy firms who have been unethical, nor will they be the last. However, when they have such significant authority and power in the accounting industry, they need to be held accountable when they bring the profession into disrepute. £25m is a huge amount of money for a fine, but when compared to the £250m which was posted all over social media and the news, it is considerably less and is unlikely to burn a hole in the pockets of these big players. This is similar to the announcement of the Big Four breakup, it has been announced multiple times over the past few years and it will continue to be announced for years to come. Unless the government fulfils their pledge to create disincentives for accounting firms to act unethically, we will be in this never-ending loop of feeble fines and empty promises.

Julius Caesar was betrayed when he was assassinated by his best friend, Brutus. Judas betrayed Jesus Christ to religious authorities in exchange for 30 pieces of silver. Mr. Orange betrayed the whole cast of Reservoir Dogs. They really are betrayals. But considering the accounting profession is so heavily based on driving good ethics, I cannot help but feel betrayed when the Big Four, the Kingpins of the accounting profession, are not appropriately punished for their unethical actions. A slap on the wrist will do nothing to gain the public’s trust and confidence in the accounting industry.

To the FRC, the government, the Big Four, please remember that responsible business is good business. 

Liam Crowe – Client Manager at Robson Laidler Accountants Limited, Director NIBE

Website links:

[1] Financial state of Carillion https://www.ft.com/content/c6f3a470-0389-41ea-bd99-5640ab9bd7fd

[2] KPMG £250m lawsuit https://www.ft.com/content/3b10ca83-7818-46d5-b492-8c86857ebd33

[3] KPMG £25m fine https://news.sky.com/story/kpmg-inches-towards-settlement-with-audit-regulator-over-carillion-collapse-12249933

[4] Break up of Big Four – 2021 https://www.bbc.co.uk/news/business-56435732

[5] Break up of Big Four – 2020 https://www.ft.com/content/1ddf7430-5987-11ea-a528-dd0f971febbc

[6] Break up of Big Four – 2019 https://www.insurancejournal.com/news/international/2019/04/02/522554.htm