Copyright: AFP
The accountancy industry is set for an overhaul after the collapse of Carillion and BHS dented its reputation.
The CMA is proposing that the parts of accountancy firms that perform audits should be separated, that FTSE 350 firms have two auditors, and that there should be more oversight as to how they are chosen.
Stephen Rawlinson, an analyst at Applied Value, says: “Over the last 20 years we’ve had a plethora of companies that have gone bust, and normally the signs were there.
“You could see from the accounting numbers with hindsight where they had been flattered, and accounts are there to present a true and fair view.”
He adds that the accountants “are not lying – this isn’t Brexit, this isn’t the Leavers,” but they can “present a flattering picture over quite a long period of time.”
“The FRC [watchdog] has been slow to change the rules, the shareholders have been slow to understand the accounts properly, and the partners of the audit firms haven’t recognised fully their own fiduciary responsibility, nor… have been fined heavily enough where the accounts have been found to be overly flattering,” Mr Rawlinson says.