In a bid to restore confidence in its audit business, Grant Thornton plans to set up an audit quality board and increase audit staff numbers with a mix of external senior hires and an increase in trainee numbers
This follows signs that the firm would need to retrench and overhaul its audit business following decisions to withdrawn from FTSE audit tenders, and a series of serious sanctions and ongoing investigations, including the Patisserie Valerie probe by the Financial Reporting Council (FRC) over a £40m accounting misstatement.
As part of the plan, Grant Thornton will invest £7m in focusing on improving the quality of its audit operation, with plans to hire 300 audit staff over the next 12 months and invest in IT development to improve its audit functions and tools.
The additional staff will be made up of a combination of senior hires and trainees, and will represent a 6.8% increase in total numbers from the current 4,410 professional staff count.
Two ‘centres of excellence’ will also be set up in London and Birmingham to ‘enhance the Firm’s ability to deliver FTSE 350 audit work’, Grant Thornton said.
This commitment follows more than £60m invested in recent years throughout the firm’s global network to better analyse data and implement regulatory changes.
The investment follows the appointment of Fiona Baldwin as head of audit earlier this month, who has also been given a seat on the firm’s main leadership board.
Grant Thornton is also awaiting the government’s final decision on how to proceed with the Competition and Market Authority’s (CMA) recommendations on audit reform. This includes the possibility of joint audits, as well as the more radical step of breaking up the Big Four firms.
Until a clear direction is set out by the government, Grant Thornton has indicated it will not reengage with the listed audit market, and will only work with that market sector for non-audit services. However, it does still have a number of FTSE 350 audit clients worth £3.2m in audit fees, including GVC in the FTSE 100.
The creation of an audit advisory board at the firm would appear to be pre-empting any possibility of joint audits or future opening up of the audit market to non-Big Four firms.
Grant Thornton said that the ‘changes are part of strengthening audit at Grant Thornton so it can compete and deliver high-quality FTSE 350 work “if regulatory conditions allow”.’
In the last year it has taken a low key approach to listed audit, having made the decision to pull out of tendering for FTSE 350 audits due to high costs and lack of opportunity in early 2018. This March it picked up the Mothercare audit business, worth around £500,000 a year in fees.
Dave Dunckley, CEO of Grant Thornton UK LLP, said: ‘These changes are also an important part of enhancing our ability to deliver FTSE 350 work in future. Large public businesses and all their stakeholders depend on the choice and quality a genuinely competitive market creates. Grant Thornton will be ready to compete, but we will only re-enter the market if the regulatory and commercial conditions allow.’
Dunckley took over from ousted CEO Sasha Romanovich when she stepped down last autumn and originally trained as a chartered accountant at London based accounting firm, Rawlinson & Hunter. He has been with Grant Thornton for over two decades, having joined the firm in 1998 after he finished his training.
It has also announced that there will be an independent review of audit at Grant Thornton although it is not clear who will be hired to handle this work.
Grant Thornton is ranked fifth in the Accountancy Daily Top 75 Firms survey with fee income of £490.8m, but is likely to slide into sixth place at the next results’ season as mid-tier rival BDO’s merger with Moore Stephens earlier this year, will create a combined firm with estimated fee income of £590m.
Baldwin, who has a full-time leadership role with a 100% focus on strengthening audit as a specialism at the firm, said: ‘Audit plays an important part in the way business and society interact. The changes we’re announcing today enable us to better support our clients, and all stakeholders who rely on audit.’