Accountancy’s Big Four are in the crosshairs of the UK government, which is set to crack down on their dominance of the audit process. New restrictions on these firms – Deloitte, EY, KPMG and PwC – would likely redouble their focus on IT consultancy services, which have become increasingly important for the quartet in recent years. But do accountants really have the expertise to advise organisations on technology transformation?
Under the UK government’s plans, the Big Four would be required to sub-contract auditing work to smaller companies and may face a cap on the number of FTSE 350 businesses they can audit. The changes were proposed in the wake of high-profile companies such as Carillion, Thomas Cook and BHS collapsing into administration with large debts, despite having previously been given a clean bill of health by their auditors. The Big Four may also be required to separate their auditing businesses from other services, such as IT consulting, to avoid conflicts of interest.
The UK is not the only regulator with a keen interest in the audit process. New rules were introduced in the EU in 2016 to foster a more dynamic and transparent audit market, although the European Commission has launched a new study into whether these changes are working. A report released in January revealed the Big Four are still ruling the roost across the bloc. “The dominance of the Big Four in the majority of member states, combined with the high proportion of revenue from non-audit work, could affect their independence, the level of audit fees and audit quality,” it states.
Why do the Big Four care about tech advice?
With their audit work under increasing scrutiny, technology consulting could become even more important for the Big Four. Consulting across a range of business disciplines is already a major revenue stream – last year both Deloitte and PwC earned more from consultancy business units than they did from any other.
In technology, this means advising businesses on digital transformation projects such as cloud migrations and the adoption of new tools and processes. Demand for this type of consultancy is likely to grow as businesses adjust to life after the Covid-19 pandemic. “Since the summer we have seen demand increase month by month as clients accelerate the transformation of their businesses, embed new technologies, overhaul their business models to deliver net zero and reconfigure their supply chains,” PwC’s UK chairman Kevin Ellis wrote in the company’s most recent annual report.
While the growing importance of consultancy is driving the Big Four’s interest in tech, clients are also putting greater emphasis on the digital expertise of their accountants, says Narayanan Vaidyanathan, head of business insights at industry body the Association of Chartered Certified Accountants (ACCA). Indeed, the role of the accountant is going through a “huge re-evaluation,” he says.
“We’re seeing much more of a role for understanding emerging technologies, processes and digitisation; and what these mean for the business model of an organisation, as well as the need for understanding wider issues such as sustainability.”
Vaidyanathan adds an understanding of tech is important for accountants and CFOs when it comes to influencing decisions about new systems. “The finance professional is looked upon as someone who can bring a balanced lens, who can see the value the technology adds but can also think about the return on investment and the implications for risks like data confidentiality,” he says.
Big Four tech advice: is it any good?
Alongside their consultancy work, all the Big Four firms are prolific producers of tech reports, covering myriad emerging technologies and predicting future trends around the adoption of things like 5G and quantum computing. “They release these reports in the hope their clients or potential clients will read them and contact them,” says Joe Robertson, an accountant who runs Big 4 Accounting, a website and podcast that tracks the progress of the Big Four and offers advice to people applying for jobs at the companies. “In reality, clients don’t really pay attention to that stuff, and the main audience for it is the press.”
While the reports are designed to prove their technology credentials, Robertson says the quality of advice clients get from the Big Four is sometimes questionable, and that the companies rely on their size and existing relationships to put them in pole position to get new business. “They’re not respected as tech consultants in a lot of instances,” he says. “But often they’re already in the building and the CEO already has their business card, so they might end up using them regardless.”
Robertson says Big Four firms can often respond more quickly to client needs than a specialised tech consultancy. “These are some of the biggest businesses in the world, so you know you can always call them up and they’ll be there ready with a ton of people to help you,” he explains.
Tech, accountancy and the Big Four: the future
Acquiring smaller tech consultancies is an important strategy to help the Big Four boost their credentials says Robertson, who has worked for two of the companies during his career. “You see this happening in countries all over the world,” he says. “Key areas are things like AWS and Salesforce implementation. Once they learn clients want a service, they quickly either recruit the people they need or buy in a consultancy firm.”
In January, Deloitte acquired Hashedin Technologies, a Texas-based cloud engineering consultancy. It is the 14th cloud-related business the firm has snapped up in the past four years. Before Christmas, EY closed a deal to buy Zilker Technologies, a customer experience specialist working with clients around the world.
For many accountants, Robertson says the lure of working for the Big Four remains undimmed. “They pay the most and work with the biggest clients,” he says. “A lot of people want to become a CFO, and being at a Big Four firm is the quickest way to get there.” Working for one of the quartet can also be a route into tech-related roles that are becoming increasingly popular as businesses embark on digital transformation programmes. “Accountants are increasingly using technology to create new roles for themselves in areas ranging from advising on cloud integrations to broader oversight of digital transformation,” says the ACCA’s Vaidyanathan. “They don’t always need to know the ins and outs of the tech itself, but they can use their knowledge of a function, organisation or industry to transform its delivery model, with tech layered on top.”
Vaidyanathan adds that it seems likely the Big Four and other accountancy firms will continue to evolve the services they offer to match the changing landscape. “If you talk to the old guard, they’ll tell you that when PCs and spreadsheets emerged in the 1980s everyone thought the traditional role of the accountant was dead,” he says. “But accountants have embraced them and thrived. Since then they’ve embraced increasingly sophisticated ERP systems, internet, cloud, and now they’re getting ready for cognitive technologies like AI. Ultimately the world will always need people who can partner effectively with technology.”