Number’s up for Big Four accountants

THE UK is drowning in a tide of greed and complacency, not least among wealthy, educated people occupying city offices.

Examples of this can be found amongst the big four accountancy firms: Deloitte & touche, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG, which audit 99pc of FtSE 100 and 96pc of FtSE 250 companies.

their global income is around £75bn, of which £25bn comes from tax advice.

they have escaped retribution for their role in tax avoidance and duff audits of banks, some would say because they are ‘too big to close’ and wield enormous political power.

the UK’s tax revenues are under attack from major corporations that use ingenious schemes to dodge taxes.

Behind the headlines is a tax avoidance industry often involving the big four firms.

last year, the House of Commons Public Accounts Committee noted that PwC would sell a tax avoidance scheme which had only a 25pc chance of withstanding a legal challenge.

As labour MP and committee chairman Margaret Hodge put it: ‘You are offering schemes to your clients where you have judged there is a 75pc risk of it then being deemed unlawful.’

Representatives of the other three firms admitted to ‘selling schemes they consider only have a 50pc chance of being upheld in court’.

the former partners of the big four firms sit on the board of Her Majesty’s Revenue and Customs (HMRC).

Staff from the big four firms sit on HMRC committees and write porous tax laws.

Numerous tax avoidance schemes marketed by the big four firms have been declared to be unlawful by the courts.

But this has not been followed by any government probes or prosecutions.

Anyone with such a cavalier disregard for public decency would find it hard to secure contracts for collecting rubbish, but the big firms receive public contracts from the NHS, prisons and Private Finance Initiative (PFI).

As external auditors they are responsible for auditing the accounts of financial enterprises, but have been very adept at letting the lying dogs sleep.

the UK has experienced a financial crisis in every decade since the 1970s. In every one, auditors appear to have been complicit.

the mid- 1970s banking crash exposed frauds at banks and insurance firms.

Accounting firms also collected fat fees and approved dubious accounts.

the same pattern has continued at Johnson Matthey Bank and the fraud-infested Bank of Credit and Commerce International (BCCI).

this was followed by the collapse of Barings, and the Bank of England investigators were unable to secure access to audit files and personnel at Coopers & lybrand ( now part of PwC) and Deloitte & touche.

the auditor silence was also evident at Independent Insurance, Equitable life and Farepak.

the 2007- 2008 banking crash showed that major banks indulged in money laundering, sanction busting and interest rate fixing among other abuses.

their accounts overstated capital, assets and profits but were all approved by auditors.

the Co-operative Bank is the latest casualty and its accounts also received a customary clean bill of health on that occasion from KPMG.

A 2011 report by the House of lords Select Committee on Economic Affairs accused bank auditors of ‘dereliction of duty’ and concluded that ‘complacency of bank auditors was a significant contributory factor’ to the banking crash.

Yet this has also not been followed up by any government investigation or prosecutions.

No government can combat tax avoidance without shackling the big four accounting firms. the firms should be deprived of all public contracts until they mend their ways and persistent offenders should be closed down.

the big four firms have on a number of occasions failed to deliver meaningful audits of financial enterprises.

In the interests of financial stability, that task should now be undertaken by the financial regulator, the Financial Conduct Authority, on a real-time basis.

this way there can be no wrangles about access to audit files and personnel.

this reform will also reduce the size of the big firms and encourage meaningful competition for audit of other businesses.