Andrew Hill Barnier redoubles siege of the Big Four auditors

European Union commissioner Michel Barnier’s proposals for tough new rules for audit firms have the Big Four professional services firms in a lather.

As the specialist journal Accountancy Age puts it:

Big Four interests are most threatened by Barnier’s proposals. At their size, they will cop the full force of regulation completely separating audit and non-audit services, potentially compelling them to split and trampling on their business model.

The thoughtful John Griffith-Jones, KPMG’s UK senior partner, was so moved as to hark back to his Welsh roots, pointing out to the FT that “if you think we’re a bit like the privatised coalminers of the 1910s [i.e. notoriously dilatory about health and safety], then you’d want to nationalise us”. He naturally prefers the analogy with expert doctors – people whose views the Commission “may want to listen to” before it leaps to regulate.

For an idea of just how far Mr Barnier has gone, you need only read my colleague Adam Jones’ May column about what the audit firms expected at the time from Brussels: encouragement for companies to put audit contracts out to tender; tighter rules on non-audit work (e.g. consulting); little likelihood of “joint auditing”, under which two firms share the work. In the end, Mr Barnier has gone for all those measures, including joint audit, often in their most radical form. Adam wrote at the time:

Whatever measures the Commission decides to pursue, it needs to make sure that it has sound analysis to back up its actions – and hard data are something that has often been lacking from the debate on audit reform, where beliefs have often had more of a theological than scientific quality.

In this spirit, Accountancy Age asks what “potential inconsistencies” in Mr Barnier’s plan mean:

Do [they] mean Brussels is merely testing the waters, and has no intention of imposing the measures wholesale? Critics would argue it shows a lack of foresight, or even a personal crusade driven by Barnier.

Crusade or not, the tenor of the proposals suggests the big firms should get ready for a long siege.