After a delay due to preparation for the ubiquitous
UCAS applications, I have found time to comment on an article regarding the
calls for the auditors of large companies to switch every ten years in the
midst of the £1.1 billion Olympus fraud which was perpetrated over a long
period of time and exacerbated by the “cosy relationship “ which was cultivated
with its auditors, one of the big four firms, KPMG.
The
Guardian article, and former Olympus president Michael Woodford, cite the need
to change auditors frequently due to the decreased risk of such frauds occurring
as an indirect result of an arguably too cosy relationship between companies
and their auditors.
Whilst
I unequivocally agree with the sentiment of changing auditors frequently to
minimise internal fraud risk, there are also a host of other benefits
attributable to changing auditors. The first is an increase in competition, not
only between the big four auditors, but an increase in competition which could potentially
also “second –tier “ firms such as BDO to compete for lucrative auditing
contracts. An increase in competition drives productivity and standards and
will help to prevent the “big four “ from becoming complacent and resting on
their laurels and becoming complacent.
Furthermore,
an increase in second-tier firms competing for large contracts could potentially
mean that the big-four would have resources free to help HMRC fight the
ever-increasing problem of tax avoidance and fraud. Corporate Tax Fraud is
almost impossible to accurately estimate, VAT Fraud is estimated at over 9
billion a year, and is now the preserve of organised criminal gangs, and there
are over 14,000 methods of tax avoidance employed by high-net-worth individuals.
It is not unreasonable to conclude that a decrease in the aforementioned “cosy “
relationships between companies and their auditors would also decrease the
prevalence of tax-avoidance /evasion schemes employed by these same companies too.
No comments:
Post a Comment