Sir Paul Tucker backs calls for break up of Big Four

Former central banker points to ‘deep rooted’ issues with the how the accountancy firms operate

by Chris Newlands, Financial News

Sir Paul Tucker, the former deputy governor of the Bank of England, has backed calls for a break up of the ‘Big Four’, saying there are “significant problems” with how the UK’s largest accountancy firms make their money.

The former central banker, who is now chair of advocacy group the Systemic Risk Council, said he believes there are “deep rooted” issues with the how the Big Four operate, suggesting inherent conflicts of interest have led to cases of poor audit quality.

“There is a worry about whose side the accountancy firms are on, and where they see their duties lying,” said Tucker.

“The problem is that they [the Big Four] do consultancy as well as auditing. Where do they really make their money? If it is not from auditing, then that’s a problem because auditing is the private provision of a public good. It is one of the pillars of modern capitalism that you need an independent audit,” added the Harvard academic.

Tucker’s comments come as UK business secretary Greg Clark has ordered the competition watchdog to carry out a sweeping review of Britain’s audit sector. Clark has also asked Sir John Kingman, a former Treasury official and chairman of Legal & General, to consider ways to remove conflicts of interest in the sector, including whether the auditors of large listed companies should be appointed by a public body.

“How do you fix the problem? Easy, you could separate the Big Four,” said Tucker. “You could separate auditing from consultancy, or limit the amount of consultancy they do.”

Pressure on the accounting industry has mounted following the collapse of construction company Carillion in January. Carillion had been given a clean bill of health by its auditor, KPMG, nine months before its demise.

Shadow chancellor John McDonnell said at a Labour Party conference in May: “Accountants and auditors seem to operate with impunity whilst lining their pockets. The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions.”

A full interview, An Audience With Sir Paul Tucker, will be published on Monday October 16th