Stand tall, Commissioner Barnier!
I have been in the job of CEO of BDO for three weeks now and am busy preparing for my first BDO Annual Conference in that role. Despite my previous involvement in international BDO affairs, I have been particularly struck if not astonished in these first two weeks by the enormous lobbying resources being deployed by the 'big four' audit networks against the imminent European Commission proposals for the audit profession and auditing in the European Union.
These proposals, not yet formally issued but widely leaked, have been developed under the direction of Frenchman Commissioner Michel Barnier, European Commissioner for Internal Markets and Services. They are the result of extensive consultation by way of a Green Paper entitled 'Audit Policy; Lessons from the crisis'. Like many others, we are generally aware of what is contained in the draft proposals and my predecessor Jeremy Newman and others in the BDO network have broadly welcomed the recognition by those proposals of the need to take strong action in dealing with the serious issues within the audit market.
Notwithstanding that the audit profession did not cause the current economic and financial crisis, it is clear to me that our profession must also be reviewed and changes made as part of the post-crisis assessment of the financial services architecture in Europe. It is disappointing therefore to see the huge resources that our larger competitors in the big 4 audit networks are putting into lobbying against the proposals.
I learned last week that one of those networks has no less than sixty - yes sixty - senior people in Europe engaged full-time in lobbying against the Barnier proposals - and we know that they have countless others involved on an ad-hoc, as-needed basis. I also understand that the same network has even approached a Brussels-based law firm to agitate against the proposals on competition law grounds. This I find almost amusing, given the collective dominance of the big 4 audit firms across Europe, and globally, and the likely competition enquiry on the audit market in the UK. I know that the other big Four networks have similar legions of lobbyists in the field.
In my view, there are strong arguments for supporting many of the Barnier proposals, even if some of the detail needs to be refined and made more pragmatic if they are to work. To reject the package of proposals on the grounds of self-interest or the over-ambitious nature of some of them is to risk doing permanent damage to the entire audit profession, of which the big 4 are only a part. The resources, reach and influence of the largest market participants is unhealthy and, for me, their enormous lobbying efforts recently only serve to reinforce this view.
I can only hope that smaller, less well-resourced market players will also make their views known adequately and participate in the debate consistently in the coming months. BDO certainly will - and has done so - to the limits of our resources. We must not allow ourselves be swamped by the weight of big 4 representation all over Europe, in the Brussels institutions, through trade associations, employers' federations and professional associations, and many other avenues where they have significant influence.
Commissioner Barnier, you will have to be brave and hold the line on addressing real change in the audit market whilst accepting improvements and refinements to your draft proposals.
I urge you to 'stand tall' - to borrow an Anglophone term I have come across.