So when will they act over tainted beancounters? Deloitte fined £6.5m for Serco audit as yet another review into the billion pound industry is prepared

Campaigners demanded urgent reform of the audit industry last night as yet another accountant was hit with a multi-million pound fine for incompetence.

Deloitte was handed a £4.2million penalty by regulators for missing a scandal at outsourcer Serco, taking accountants’ total fines so far this year to more than £31million.

It came as Business Secretary Greg Clark announced yet another consultation, which could see efforts to improve the industry softened yet again.

Business Secretary Greg Clark has announced yet another consultation, which could see efforts to improve the audit industry softened yet again

Business Secretary Greg Clark has announced yet another consultation, which could see efforts to improve the audit industry softened yet again

Critics said that ministers have repeatedly kicked the issue into the long grass – and demanded action rather than more delays.

Prem Sikka, a professor of accounting at Sheffield University, said: ‘The Government needs to take swift action to reform auditing. 

But now we hear Greg Clark is proposing yet another consultation. There is no sign ministers are going to take any kind of serious action here.’

Regulators have found that audit firms missed huge frauds, failed to spot multi-billion pound black holes and even cheated on professional ethics exams.

In the past year, both the Competition and Markets Authority (CMA) and former Legal & General chairman Sir John Kingman have published recommendations on reforms that are needed. 

READ  Star fund manager Terry Smith defends buying troubled Facebook

Another review, by former London Stock Exchange chairman Donald Brydon, is also under way after launching in February.

The accounting industry is desperately lobbying to prevent efforts which campaigners hope will make it more accountable, such as splitting up its consulting and audit arms to avoid conflicts of interest.

There have been calls to reform the profession since the 1930s, but repeated reviews have not led to an improvement.

Sir Vince Cable, leader of the Liberal Democrats and former business secretary, said: ‘The Government is not moving fast enough with audit industry reforms. We’ve been round this circuit several times. 

‘There is insufficient challenge to the Big Four, who have grown fat off their semi-monopoly positions.’

Deloitte was fined by the Financial Reporting Council (FRC) after it failed to spot efforts to hide profits which outsourcer Serco made from electronic tagging contracts. 

The FRC – which is itself being scrapped and replaced with a new watchdog after Kingman exposed its cosy links with the industry – said it could not reveal details of its probe into Deloitte because related investigations are continuing.

But it said the firm and audit partner Helen George had failed to act competently.

Deloitte was ordered to pay a £4.2million fine – just 0.1 per cent of its £3.6billion annual UK revenues. George was fined £97,500 and remains at the company, which pays partners an average of £832,000 per year.

Serco was fined £22.9million in a settlement with the Serious Fraud Office on Wednesday over the tagging scandal at its Geografix subsidiary between 2010 and 2013. As auditor, Deloitte was in charge of checking the accounts.

READ  The London Report: Tobacco groups drag on the FTSE

It is the latest major embarrassment for a member of the Big Four auditors – PwC, KPMG, Deloitte and EY – amid growing pressure on the industry. Between them, their UK operations raked in £12billion of revenues last year.

However, yesterday Clark (pictured above) told Business Select Committee chairman Rachel Reeves he was committed to reform but only ‘where it is needed’ and announced a two-month consultation on the CMA proposals. 

In a letter that will be seen as laying the ground for a softer approach, he said ministers want an ‘effective and proportionate package of reforms for the audit sector’.

 



READ SOURCE

WHAT YOUR THOUGHTS

Please enter your comment!
Please enter your name here