Ex Big Four staff chair majority of audit committees
6 Jan 2020
Six out of 10 FTSE 100 audit committees are chaired by former Big Four audit firm alumni, according to exclusive research by Accountancy Daily
6 Jan 2020
The percentage of chief financial officers (CFOs) is even higher with two thirds of top finance jobs held by alumni who trained at Big Four firms. Even at board chair level, there are 18 alumni, up from 12 in the previous year’s survey.
PwC has the strongest presence at the top of listed UK companies with nearly a third of CFOs emanating from the largest UK firm, while it can lay claim to 20 audit committee chairs.
The annual Accountancy Daily Big Four Alumni survey also shows that firms beyond the Big Four have little reach into the top UK companies with only one company chair from a non-Big Four firm.
Mid tier firms BDO and Grant Thornton have no representation at this level, however alumni of long defunct Arthur Andersen still wield influence with 12 holding CFO roles, up from 11 in 2018, and seven as audit committee chairs.
This plays into concerns about potential conflict of interest and the failure of Big Four firms to challenge management when auditing the largest listed entities, while audit committee chairs may be put in an untenable position, particularly in instances where the company is audited by the chairs’ alumni firm.
There are 14 FTSE 100 companies that are audited by the audit committee chair’s old firm.
‘The expertise resides in the very group that is conflicted,’ says Karthik Ramanna, professor of business and public policy at Oxford University’s Blavatnik School of Government.
The risk of conflict was highlighted by the Competition & Markets Authority (CMA) in its recent audit market review, which warned that the FTSE 100 Big Four link raised ‘questions about whether audit committee members’ greater familiarity with the Big Four might lead them to favour Big Four firms when assessing audit tenders’.
In terms of training and qualifications, the ICAEW dominates with around half of audit committee chairs and CFOs holding ACA status.
However, while other institutes such as CIMA and ICAS have a couple of alumni apiece, more than a third of CFOs do not hold a specific financial qualification from a UK institute, but many have MBAs or other qualifications from non-UK training bodies.
Read the full report, analysis and league table Big Four Alumni Survey: questions of conflict at FTSE 100