Big Four Complacent...Along With House Of Lords

A House of Lords report has labelled the "Big Four" accountancy groups as complacent in their failure to identify the corporate failings which contributed to the banking crisis. This charge is not new and was explained at the time by the firms in question as due to the retrospective nature of an audit process that is not designed to predict the future. The same firms are, however, also heavily involved in economic and financial forecasting for clients through their management consultancy divisions. The fact is that they had - as strategy firm Mckinsey, with no accountancy practice, have acknowledged - bought into the "financial deepening" of an ever more complex banking system so completely that "no more boom and bust", to quote former Chancellor of the Exchequer Gordon Brown, was the economic doctrine of the day.

The fact that this doctrine went widely unquestioned by "corporate insiders" should come as no surprise, as illustrated in the fate of a former HBOS financial director who was forced out of post when he started to raise difficult questions well before the banking crisis began. Deep thinking, in my experience, is rarely regarded as a core competency for progression up the corporate ladder. Although there are exceptions to the rule, the culture of most large, and many smaller, organisations - private, public and even non-governmental - tends to favour compliant people who swim with the tide of current thinking. For not to adopt this approach runs the clear risk of losing one's job, promotion or, in the case of audit firms and consultancies, like-thinking clients such as key financial service and government accounts.

Given that the House of Lords is packed with these corporate insiders - and in the interests of editorial balance after my previous post on Nimbyism - I'm inclined to come to the defence of the large audit firms which it has chosen to criticise. I did many years ago also enjoy the employment of one myself, until it was pointed our to me that I was not suitable material for progression up the corporate ladder: a judgement with which I had to agree. Business services, like banking and the legal profession is, after all, a sector for which Britain is internationally renowned and an important contributor to UK plc. The sector attracts many intellectually talented, emotionally intelligent and socially well-adjusted people of the kind who make stimulating and congenial colleagues, whose achievements are regularly recognised in the honours system, and sometimes through elevation to "the other place".