The ‘Big Four’accountancy firms have been “complicit” in a number of high-profile business failures such as that of Thomas Cook, the chair of the House of Commons’ business, energy and industrial strategy committee has claimed.
Labour MP Rachel Reeves made the claim while partners from EY and PwC, Thomas Cook’s former auditors, were questioned by the committee over the collapse of the travel company.
She also accused the PwC of having a “conflict of interest” for auditing Thomas Cook’s books between 2008 and 2016 while also being paid £1.8m for advising its remuneration committee.
While questioning Hemione Hudson, partner at PwC she said: “…it is impossible to separate out and get rid of the conflicts of interest when the remuneration of the people doing the audit work depends on the success of the other parts of the business, advising the same firm that they are auditing?
“You said before that the rules had to be changed to reduce some of those conflicts of interest; can you not see that those conflicts of interest still exist in reality, and certainly in the view of most people?”
Reeves also said that the ‘Big Four’ need to accept that reform of the industry is required in order to avoid future failures from happening.
She concluded: “I think the conclusion that policy makers will take from today is that we can’t rely on you to do the right thing, and that legislation is needed. Legislation is needed to have a tougher regulator; we will be seeing the regulators shortly.
“We need tougher regulation because your industry is not willing to make the changes needed. Reform is long overdue and the evidence today makes it clear that that moment has got to come and it has got to come soon. Otherwise, we will have more business failures and you will be complicit in those. Thank you very much.”