Tag Archive | "oft"

Big Four accused of dereliction of duty


The Big Four’s domination of the audit market came under threat last week when the House of Lords recommended a detailed Office of Fair Trading investigation.

This investigation would be the first time the Big Four have been investigated since a full scale competition investigation was discounted in 2002, following the collapse of Arthur Andersen.

The regulators also came under fire as the House of Lords committee slammed both groups for dereliction of duty and said the breakdown of communications between regulators and auditors compounded the financial crisis.

Box-ticking International Financial Reporting Standards were in the limelight and the Lords recommended that caution should once again become the guiding principle of audit.

The economic affairs committee has now published its report on the eight-month investigation into the UK audit market. The inquiry said that large firms are limited in their choice of auditors because of the oligopoly of the Big Four. Last year, they conducted the audit of all but one of the FTSE 100 organisations and these large companies tend to stick with the same auditor for an average 48 years.

The report went on to point out that there is a risk of one of the firms dropping out of the audit market and this would lead to an unacceptable level of market concentration.

The committee recommends, amongst other things, that companies in the FTSE 350 must put their audit contract out to tender every five years and that external auditors are banned from giving internal advisory services and advice to the risk committees of firms they audit.

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Corporate insolvency regime consultation launched


A consultation has been launched by the Insolvency Service into the Office of Fair Trading’s proposals for changes to the regime governing corporate insolvency.

The Market for Insolvency Practitioners in Corporate Insolvencies report was published last June and recommended changes to ensure creditors received the best outcome.

Edward Davey, the minister in charge of the insolvency regime, said the consultation was of great significance to anyone affected by insolvency, including accountants for contractors, as it contains proposals to set up an independent complaints body. It is an opportunity to comment on how the government can make sure unsecured creditors get a fair deal when a company goes under.

In addition to the complaints body, the consultation considers reform to the regulatory framework and amendments to the legislation concerning administration and liquidation.

Insolvency Practitioners Association chief executive, David Kerr, said he particularly welcomed the proposals to set up the new complaints body.

Philip King, from the Institute of Credit Management, also welcomed the consultation saying that any initiative that improves the outcome for unsecured creditors has to be applauded.

The president of R3, the insolvency trade body, whilst welcoming the consultation, said he thought unsecured creditors wanted to take a more active role in insolvency proceedings. He pointed out that they have the ability to influence decisions but rarely get the opportunity to engage in the process.

When a company goes under it is very unusual for there to be enough money left to pay all the unsecured creditors. This leads to frustrated unsecured creditors but does ensure that secured creditors will continue lending, he added.

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Contractor accountants need a financial contingency plan


Contractor accountants and other professional freelancers must be prepared for financial changes, especially in these times of economic uncertainty.

The MD of the Debt Advice Foundation, David Rodger, said that everybody should have a Plan B, even if they believe their job is secure.

Rodger pointed out that redundancy might have a massive financial impact on a person’s household budget so having the foresight to plan ahead can lessen the chance of future difficulties.

This is simple to do, he says. Set yourself a realistic budget so that you do not overstretch your finances or spend large amounts on credit and keep a “rainy day” fund to tide you over if you have the misfortune to lose your job.

Contractor accountants working through umbrella companies might find that they are in and out of work due to the nature of freelancing. It is therefore vital for them to have a reserve cash fund in case work dries up for several weeks at a time.

The threat of more job cuts in 2011, coupled with the increase in VAT, could mean that more people fall into financial difficulties. The Money Advice Trust has already forecast that the number of people seeking advice on debt is going to reach a record high soon. Surprisingly, only around 16% of people who currently have money troubles seek advice.

However, consumers are showing signs of concern when it comes to debt, according to quarter four data from R3. 47% are worried about their credit card debt, 28% about their overdraft and 23% are concerned about meeting mortgage repayments.

Last week, the government launched a consultation into the regulation of consumer credit. It wants to transfer the responsibility from the OFT to a new authority; the consumer protection and markets authority. The government hopes this would provide more protection for consumers and remove regulatory burdens on businesses.

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