Parliament exposes scandal, then buries it

For a long time, there has been disquiet about the power of the large accountancy firms which both audit and advise companies. From time to time, the dire effects of this conflict of interest come to light. The collapse of the American conglomerate Enron back in 2002 should have warned government and standards bodies in this country. Enron's auditors, Arthur Andersen, had also been employed as financial consultants by the company. Enron's fall, exposing both its convoluted financial structure designed to present a false impression of profitability, and the light touch auditing which allowed Enron to get away with it, resulted in the break-up of the long-established Andersen, until then one of the great US accountancy firms. However, nothing was done this side of the Atlantic. Those were the days of New Labour government when its godfather Peter Mandelson professed himself intensely relaxed about people getting filthy rich and Gordon Brown applied only the lightest touch regulation (though it has to be said that this was too tough for some Conservatives). The laissez-faire attitude to banking reserves and financial derivatives led to the transatlantic credit crunch of 2008.

Although banking rules were tightened up as a result, nothing was done to check the major accountancy firms. Private Eye magazine has long campaigned on the subject, occasionally publishing special exposés like this. Perhaps the fact that many MPs were provided with office support by some of the firms in question kept parliamentary concern to a minimum. It took some major commercial failures to wake legislators. The Business, Energy and Industrial Strategy Committee of the House of Commons started an investigation in 2018 which led to a report published last week.

In it, the Committee proposes the breakup of the "Big Four" (Deloitte, EY, KPMG and PWC). (They might also have looked at the biggest firms in the next division down, like Grant Thornton who were less than professional , to put it kindly, in taking the profitability of Patisserie Valerie on trust.)

What disturbs me is that there has been no sign that government or parliament have even taken note of the report. Nor has the BBC been particularly interested apart from a mention on the Business programme on the News Channel. There have been two sessions of Prime Minister's Questions and one of questions to the Treasury team without an enquiry as to what government was doing about it. I await next Wednesday's Private Eye with interest.

By the way, in case there was a suspicion that the BBC had a vested interest in keeping this matter quiet, it should be said that the corporation last year gave up using a big four company as its external auditor in favour of the non-commercial government agency, the National Audit Office.