BDO Stoy Hayward

Well this is it..

2008-07-04T18:02:00+01:00

Jeremy Newman's term of office as Managing Partner of BDO Stoy Hayward LLP came to an end on 4 July 2008 and his blog is now inactive. Jeremy will become CEO of BDO International on 1 October 2008 and will resume his blog from that date on the BDO International website (www.bdointernational.com). If you want to contact Jeremy about any item on his blog you can send him an email to jeremy.newman@bdo.co.uk

This week has seen what the FT described as a..

2008-07-03T00:59:00+01:00

.. "Landmark move by accounts watchdog" with the publication by the FRC of guidance on the use of Liability Limitation Agreements ("LLA").

Whilst not perfect (but then what is?) the guidance together with a supporting Press Release from the Institutional Shareholders Committee give a clear signal that the only acceptable form of LLA is one based on "proportionality". As regular readers will know this is the outcome we have been seeking ever since it became likely a few years ago that legislation would be introduced permitting LLAs.

I firmly believe that "proportionality" is the only acceptable form of LLA for audit engagements and have always believed that absolute caps would provide yet further advantage to the largest firms. I very much hope that everyone in the profession - as well as other market participants - will now focus on ensuring that all LLAs are based on "proportionality".

I am typing this in my hotel room in Kuala Lumpur (it is 11.30pm here)..

2008-06-26T16:30:00+01:00

.. where I have been (Kuala Lumpur - not the hotel room!) for the past 2 1/2 days having spent the previous 1 1/2 days in Hong Kong meeting our Chinese member firms. I am in KL for a meeting of the BDO International Policy Board - and have also had the opportunity to spent time with our Malaysian member firm.

It has been a fascinating - and very productive - trip albeit not yet over as I am being interviewed tomorrow by the local business press on the recent LSE research on the effects of concentration in the audit market given there are similar concerns in Malaysia to those in the UK.

The trip has given me yet further evidence of the ambition and quality of the BDO network. Not every firm is yet as strong as it needs to be but they are investing in high quality people and creating an exceptional level of client service so I have little doubt that they will all respond to the challenges of the market and that they will further serve to enhance the overall reputation of BDO International.

Using relationships to win work

2008-06-15T00:14:00+01:00

We recently won the audit of an international group in one of our key industry sectors – Real Estate.

A key factor which brought about this win came when we had the opportunity to show our true colours. We responded rapidly to help the FD with a technical issues at a time of need, this demonstrated how our stated commitment to excellent client service works in real life.

We also spent time developing wider relationships, to really get to know the client. This enabled us to allay some initial concerns held by the Audit Committee and the Board, about the potential difficulties associated with changing auditors and some associated worries about changing from a Big 4 audit firm to ourselves. Focusing on their questions, we told them about the scale of our international network, our sensible and transparent approach to fees and the quality of the service they can consistently expect to receive.

We were thrilled to win this new assignment and the opportunity to continue of a strong relationship.

One of the encouraging aspects of our current Brand advertsing campaign...

2008-06-08T01:15:00+01:00

... has been the level of internal engagement.

I know that the campaign is focussed on the external market but it is important for there to be internal engagement and, to date, there have been over 2,500 "hits" on our internal microsite with almost 600 people voting for their favourite advert. Not bad when you consider we employ some 3,000 people.

I hope that the external impact has been as effective.

Competition & Choice - what now?

2008-06-06T00:59:00+01:00

The last few weeks has seen a flurry of activity.

On the positive side our PR team and advisers won a global award for their work on this debate; a clear signal that it is recognised as a serious and mature debate and one that has created impact - and is hopefully creating change (even if only modestly).

We also saw the first response from a Big Four firm to the LSE research - aside the various "sound bites" in the few days after its initial publication. I must say that I found this response disappointing as it didn't actually address the issues raised by the LSE research and whilst very briefly criticising their methodology didn't say why. Indeed, it sought to suggest that there wasn't even a problem.

I guess you could say this was positive as by not having a serious response by implication it suggested that the LSE methodology is robust and by failing to address the real issues perhaps accepted that there is no substantive response - thus accepting that the research does prove there is distortion in the UK audit market - and that the only response is to pretend there isn't an issue. I was disappointed, however, as we commissioned and published the LSE research to prompt a serious debate - not to trade sound bites and personal comments.

So this is a plea to all those with an interest in this issue to join the discussion and engage on a serious basis.

We launched our island in Second Life this evening...

2008-05-07T23:43:00+01:00

... with the worldwide exclusive premiere of three short films focussing on Tax Investigations.

I believe that the opening of a Second Life island puts us at the forefront of the latest technological social trends and that it will give us many business opportunities in areas such as cutting our carbon footprint with on-line meetings, presentations and events for staff, clients and alumni; enhancing our recruitment options and opening a new platform to engage with a broad international audience.

In a "first" for us Second Life, YouTube and viral marketing are all being used in the launch of the tax investigations films.

This is the culmination of many months hard work building our island and I have been looking forward to its launch for some time. I am particularly grateful to my firm's Head of On-line, Iain Simpson, for persuading me (I didn't need much persuading - promise!) that it will be a worthwhile adventure.

I was privileged to attend the Prince’s May Day Business Summit on Climate Change yesterday.

2008-05-02T15:42:00+01:00

I was pleased to be able to confirm my firm’s commitment to continuing to calculate our carbon footprint and to report it publicly and to Business in the Community. I must admit I was slightly disappointed that not everyone present was prepared to make these two commitments which it seems to me are a basic start if you are truly committed to taking action on climate change. I was also pleased to be able to promise that we would continue to work in partnership with suppliers to reduce the level of emissions in the supply chain. We do this now on our office fit outs and moves and I hope we will find a way to extend this to the broader supply chain.

I made new commitments to set an absolute target and take actions which reduce our carbon emissions and I will be working with our people over the next few months to develop a meaningful policy in this area. In addition I committed to seeking ways in which we might encourage employees to reduce their carbon footprint at home and at work. We already have actions to help employees reduce their carbon footprint at work including recycling policies, printing double sided and our payroll scheme to encourage employees to buy (and therefore hopefully use) bikes. This latter initiative not only helps reduce our carbon footprint but also helps maintain fitness. It will be more of a challenge to find ways in which we can encourage employees to reduce their carbon footprint at home but, given the number of people who we employ, if we can make a modest difference in this area it could be quite significant in overall terms.

Not quite your normal "run of the mill" day and certainly very different from the week. It is the variety which makes the job so interesting.

"This is not about price as such, it is about whether the market is distorted..."

2008-04-29T22:13:00+01:00

Readers of today's FT will have seen that we have published independent research carried out by the London School of Economics which shows that the dominance of the Big Four firms has directly led to an increase in audit fees. This is clear evidence to support our long standing contention that the market place is not operating as it should and, alongside other evidence and concerns over undue concentration, will hopefully prompt a change in mindset and behaviour amongst UK plc. It is now clear, as if further evidence was needed, that a further reduction (from a Big 4 to a Big 3) would be a major concern and the best way to mitigate against such an eventuality is to widen the choice in the marketplace now, before it is too late.

So what do I hope might happen as a result of us publishing this research? Well first, and as noted above, I hope it provides further evidence of the need for a change in attitude and approach by UK plc towards the choice of auditors. But I think it also adds weight to the need for perhaps a sharper approach to addressing the issue of competition and choice.

When I first publicly set out my views on this issue some years ago I said there were three things that were needed as a matter of priority. First, we needed research to show the effect of concentration in the marketplace which I hoped would help people recognise the extent of the issue. I hope this research, added to previous reports published by the FRC and others, makes it clear that there is potential distortion in the market and that something needs to be done. Second, I urged the publication of AIU inspection reports to (hopefully) help dispel the myth that only the largest firms are capable of delivering a quality audit. This is due to happen later this year - not as speedily as I had hoped but very welcome. The style and format of these public reports is not yet known but I am sure the FRC is aware of their importance and will ensure they address the need to give a better understanding of audit quality at all the leading firms. Third, I suggested that "Big 4 only" clauses in banking and other agreements should be banned. Progress here has been more modest - and even slower. The FRC has agreed that details of such clauses should now be published in he annual reports of companies and I understand they hope that over time this will lead to such clauses no longer being a regular feature of bank facility agreements. Personally, I think this is too little.

One of the arguments I have heard for not banning such clauses is that they are an outcome of a free market and it would be inappropriate to restrict the free operation of the market. I believe that teh LSE research has dispelled this assumption ion that it shows that the market is distorted and thus we need to be aware of anything that might be a result of that distortion or that might encourage that distortion. I believe that "Big 4 only" clauses fall firmly into that description - and this should be banned. As well as removing a potential market distortion it would also send out a strong message about the need to broaden choice.

Although the research only considered the audit market I believe it is implicit that there will be a similar position in other parts of the market which are highly concentrated and thus equally an issue in respect of non audit work. "Big 4 only" clauses serve to restrict our ability, and that of other firms, to provide non audit services as well regardless of our capabilities.

We have published this research as part of a genuine desire to stimulate discussion and debate - and we look forward to responses from other interested parties.

I'm impressed..

2008-04-21T23:51:00+01:00

.. by today's announcement from Ernst & Young about the creation of a global partnership. Creating closer links between BDO Member Firms was always on my agenda for when I become CEO of BDO International later this year - but by their bold move E&Y have sharpened this challenge. I wish them good luck and hope we can all learn from them.

We had a great client reception in our new London office...

2008-04-17T13:40:00+01:00

... last night.

55 Baker Street was previously the Headquarters of Marks & Spencer and has been totally redeveloped into a striking new design by architects Make, headed by Ken Shuttleworth, who was responsible for the design of the Swiss Re building, more commonly known as the Gherkin. Despite its radically improved appearance, 50% of the existing built fabric has been retained. In addition to the cost savings represented by retaining and refurbishing the existing building, the scheme has been designed to minimise environmental impact and optimise energy efficiency and has achieved a BREEAM rating of “Excellent”. A system of chilled beams offers a controlled environment within office areas, combining exceptional levels of energy efficiency and low running costs. The result is a refurbished building which has achieved higher energy efficiency levels than a new build.

It's also a great place to work and a fabulous venue for a reception.

I am sitting in our new London office...

2008-03-20T13:07:00+01:00

... having been one of the last few people to move out of our old office. It was an emotional moment - I have spent most of my working life there and remember when we moved in over 23 years ago. However, sitting here in our new offices it is apparent how far the firm has moved.

We are still in Baker Street - we've moved from No 8 to No 55 - and are now opposite the building where I started work at this firm almost 30 years ago (54 Baker Street). But whilst we have moved only modest distances in terms of our working environment we have made an immeasurable move. And of course today there are issues that we didn't even think about when we last moved.

Our new building is the redevelopment of what was the Head Office of Marks & Spencer. Ever conscious of the environment and the costs that can be saved, 50% of the existing built fabric has been retained despite the radical transformation of the building. The building has achieved a BREEAM rating of "Excellent" and has higher energy efficiency levels than a new build.

It looks great; it feels great to work in; and I am sure, alongside all the other property moves and improvements we have made on a national basis over the past few years, it will prove to be suitable for our next phase of growth and development.

Should reports on the Budget be merely factual...

2008-03-12T23:31:00+01:00

... or is it better to be provocative and prompt deabte and discussion? This is a perennial challenge for accounting firms as the annual budget ritual becomes more predictable and the opportunity to deliver real value added advice becomes more difficult.

Unsurprisingly, given our commitment to promote debate and seek to provide insight and not merely comment, my firm's tax partners have decided to adopt the latter approach with some strident views from our tax spokesman, Stephen Herring. I can do no better than set out some of his comments:

"Since his appointment in June and, more specifically, the adverse reaction from British business to his proposals for capital gains tax reform and the taxation of non-domiciles, the Chancellor has, perhaps unsurprisingly, opted to avoid a third strike with its perhaps inevitable consequences. For example, he has deferred the "so called" income shifting rules which sought to prevent certain small businesses using dividends to divide income between spouses and thereby obtain an additional basic rate tax-band. Pursuing these measures would have resulted in a further bare-knuckled fight for the Chancellor with, this time, the small business lobbying organisations.

"It is interesting to note that the Chancellor appears to favour tax simplification but has already departed from this principle so far as "green taxation" is concerned with additional complex provisions for tax allowances on company cars. This demonstrates the dilemma faced by Chancellors wishing to simplify taxation but having to forgo this where other Government initiatives are considered to be more pressing.

And finally..."I am disappointed that he did not take the opportunity of introducing additional taxation incentives and reliefs where these would not have been too costly in terms of overall government tax revenues. Examples include the disappointing increase in ISA investment limits by only �200, the failure to increase inheritance tax limits to account for house price inflation in recent years and a derisory increase of �400 in the capital gains tax exemption. These are examples of fiscal drag where the Chancellor should really look to RPI indexation as a minimum benchmark which he should normally be able to exceed. Perhaps most disappointingly, the UK will remain behind the curve in its reductions of the headline rate of corporation tax. Although this reduces to 28 per cent on the 1st April 08, many other leading developed countries such as the Netherlands and Germany already have lower corporation tax rates and some EU members such as Ireland, Poland and the Czech republic have substantially lower headline rates. The Chancellor should have announced a stepped reduction over 3 years to 25 per cent to keep the UK tax system competitive internationally."

You can agree or you can disagree with Stephen but hopefully his comments will help stimulate deabte and discussion with our clients and others.

I am currently "on the road"....

2008-03-05T12:22:00+01:00

... doing my annual series of presentations to all staff and partners. The theme this year is "Stepping up the Energy" and is linked to the "Energy for Clients" programme that we ran last year and which I commented on in December.

One of the biggest challenges is keeping my own energy levels up (I have done five presentations so far this week with another three to go - as well as all next week and some last week!). This is made much easier by the fantastic engagement and support I am getting from all our people.

This level of engagement, energy and support is why I am so confident that we have the ability to deliver an exceptional client experience.

Is there still an issue over “Competition and Choice”?

2008-02-18T11:18:00+01:00

At the end of January the US General Accountability Office (“GAO”) published a report on concentration in the audit market in the USA. Its title is “Continued Concentration in Audit Market for Large Public Companies Does Not Call for Immediate Action”. This is despite the fact that the report agrees that there is market concentration and a lack of choice. The report also comments on significant increases in audit fees in recent years but states that “factors other than concentration appeared to explain audit fee levels”. Finally the report states that “Given the lack of significant adverse effect on concentration in the current environment and that no clear consensus exists on how to reduce concentration, no compelling need for immediate action appears to exist”. I find this both curious and frustrating.

This seems to suggest that because there isn’t a readily obvious solution and because the adverse effects are not “significant” they should just be ignored. Hardly a typical US approach.

The report does raise concerns that any further consolidation – either due to merger or the failure of a major firm – could adversely affect audit fees and cause other significant issues. Interestingly the report refers to the abortive merger discussions between KPMG and E&Y in 1997 and suggests that these talks were abandoned after the US Department of Justice raised concerns about the effect this merger would have on competition. Thus, in 1997 the DoJ was sufficiently concerned about the “Big 6” becoming a “Big 4” (the Price Waterhouse/Coopers & Lybrand merger had been announced but not concluded) to effectively prevent this happening. Yet now, when we do have a “Big 4” (and their relative size in the US is even greater than in the UK) there are apparently no such concerns.

Interestingly, in the UK the FRC has dismissed the GAO’s conclusions whilst accepting their findings and primarily because the FRC takes a different view on the potential adverse effects of further concentration and, I suspect, is also more concerned about the possibility that a major firm might withdraw from the audit market.

The GAO places significant reliance on the ability of regulatory authorities to mitigate the effect of the loss of a major firm. Paul Boyle, Chief Executive of the FRC, stated in a recent article in the Financial Times “In the UK at least, we believe that this reliance is not well-founded”. Whilst Paul Boyle also accepts that there is no readily obvious solution he states that “in the UK we have found sufficient consensus to come up with a package of 15 recommendations designed to reduce the risks and improve the market”.

I think the FRC is right – there is an issue and it is not good enough to ignore it because there is no obvious solution.

One of the things I did when I was in Israel...

2008-02-06T21:45:00+01:00

... was to attend a reception to celebrate the opening of a new office in Bnei Brak - a suburb of Tel Aviv occupied mostly by orthodox Jews. The staff in the office are all orthodox women who want to work but who find it difficult to work far away from home and whose religious needs make it preferable for them to work with only other women. Many of these women have large families and often have husbands who are not working so the women are the main breadwinners in the family. Many of the jobs available to these women are mundane and often menial so it was fantastic - and humbling - to see a new office dedicated to giving intelligent, educated women an opportunity to participate in the workforce. A real example of diversity and social responsibility - which is sustainable because it has a real business purpose.

Still with people, I was delighted that a trainee from our Malaysian member firm won first prize in the recent ICAEW New Professional Stage exams. Our Malaysian firm has recently embarked on an ambitious recruitment drive and are now attracting some of the best graduates. Yu Chen Gan is their first ICAEW ACA trainee and her success augers well for the future.

The challenges of transition

2008-02-04T14:45:00+01:00

As you will all be aware my successor as Managing Partner has now been announced and the speculation has started as to what this will mean for the firm - both internally and externally. On a personal basis it is difficult to be dispassionate - but I am doing my best to stay out of the debate as what matters is what actually happens not what others speculate might happen. My hope is that there is change that builds on the progress we have made over the past seven years. Some of the challenges we have faced are no longer there, some are more difficult and a fresh approach to dealing with them is a good opportunity for the firm. I am closely associated with a number of campaigns and issues and people tend to want to know my views on these issues making it difficult to move into new areas. On "Competition & Choice" we need to widen the debate as there is now general acceptance, at least in the UK, that this is an issue and it remains firmly on the agenda of the FRC and others. We now need to work with others towards creating the change in the market place that will start to create a solution. I believe we have moved in this direction - as reflected in our Report and Accounts published at the end of last year - but a new "tone of voice" will help.

Internally we need to continue to strengthen the employment experience that we offer - as there is never any room for complacency - and combine this with ensuring we also deliver an exceptional client experience (as someone said to me recently it's about "doing things right" rather than merely "doing the right thing").

In the short term of course we have to continue to run our business during the transition period and not get distracted by debates about "what might happen". This will be a challenging few months and I remain determined that my last year as Managing Partner should build on the success of earlier years and leave a healthy and positive legacy to my successor.

I am sure that Simon Michaels will be a worthy successor and I look forward to the future development of the firm with great confidence.

I spent Monday and Tuesday in Israel in my role as...

2008-02-01T23:49:00+01:00

... CEO Designate of BDO International. I was attending a conference together with global leaders of the Big 4 on the launch of IFRS in Israel.

This was clearly an important event as four of us (one firm could not make the meeting), together with the heads of our Israeli member firms and representatives of the Institute of Certified Public Accountants in Israel, met with the Prime Minister of Israel for about an hour on Monday.

There was a Gala Dinner on Monday evening which was addressed by Israel's Minister of Finance and the five of us shared a panel session at the conference on Tuesday.

The combination of the five firms gave the various speakers some difficulty in describing us collectively. For example, at the dinner we were referred to as the Big 4 - which included BDO but not one of the firms one would usually expect to be included in this descriptor. On occasion we were referred to as the Big 5 and a few times we were called the Big 6 - albeit there were five of us. Mostly we were referred to as the "world's leading accounting networks".

In Israel it is probably fair to refer to us as one of the Big 4 ( as we are larger than one of the "Global Big 4" in Israel) and it is certainly fair to refer to us as one of the Big 5 - though I accept that globally, and in many countries (though not all - as there are some, as in Israel, where we are "number 4" or are certainly "number 5" and well ahead of "number 6") this is not really appropriate.

In truth the descriptor is less important than recognising (as the Israelis have) that we are large enough to compete globally with the so called Big 4 - and have a better global reach than any other firm aside the so called Big 4.

I spent Monday and Tuesday...

2008-01-20T13:20:00+01:00

... in New York at the fourth Global Public Policy Symposium ("GPPS IV"). GPPS IV was a meeting of representatives of "the world's six leading accounting and audit networks", regulators, investors and business leaders

In my view this was the best such meeting so far for a number of reasons. From a personal perspective it was good to see BDO accepted as an equal partner with the other leading global networks - there were far fewer references to the "Big 4" than at previous meetings (when this was followed by a mumbled apology to include BDO and GTI) and most of those came from John Humphreys who was "moderating" the various sessions. In addition, there was positive dialogue with investors and an overwhelming feeling that we can work together. There was also support from regulators particularly for global accounting standards but also for global auditing standards and even for a more global approach to regulation. All very positive developments. There is still some way to go but this was a good step in the right direction.

A relatively quiet start...

2008-01-09T00:29:00+01:00

.. to the new year though the FT supplement on Chartered Accountancy on Monday made interesting reading and perhaps indicated the next areas for debate including ownership and capital structures. There are also a number of interesting - and important - consultation papers including one on how to implement the new law on Liability Limitation Agreements. But overwhelmingly the current concerns are on the impact of the "credit crunch" where there is much speculation - but limited evidence. What seems clear is that there will be some corporate collapses and the concern is that these will (unfairly in my view) be automatically followed by cries of "audit failure".

Invariably corporate failures are linked to management failures - there may be an audit failure but this should not be an automatic assumption nor is it likely to be the root cause of the corporate collapse. This is an important message to get out before we have a corporate collapse - and one that I hope people will remember.

It has been an interesting year...

2007-12-29T18:27:00+01:00

.. and the coming year promises to be equally interesting and have its own new challenges. I wish you all the best for 2008 - and may it bring us all opportunities for personal growth and development.

We have just completed a fantastic development programme...

2007-12-19T23:25:00+01:00

...called "Energy for Clients" (or E4C in shorthand).

E4C was an ambitious programme intended to help all our staff understand how each of them needs to be involved in delivering a Breakthrough Client Experience to all our clients. It was ambitious because this is the first time we have endeavoured to give all our staff a similar development opportunity in a series of one day events run over four weeks - and with clients coming along to share their (unscripted!) views and experiences with us.

The feedback on the programme has been really good but the most positive feedback is that some 92% of our people at all levels, and including partners, participated in E4C. Given there will always be some absences due to client commitments, travel problems, sickness and other demands this level of participation reflects an extraordinary degree of commitment by our people to really understand what each of them can do to deliver a truly breakthrough client experience.

This is the first in a series of programmes we are developing to harness our exceptional employment experience and translate this into an exceptional client experience so that we deliver an award winning client experience to match our award winning employment experience.

We are on our way.

I spent yesterday at a meeting of the BDO International Council...

2007-12-06T12:02:00+01:00

... in Amsterdam where I was delighted to meet the managing partner, Michel Leger, and a number of the other founding partners of the newly formed BDO France. Michel has been a partner in a number of Big 4 firms, as have many of his partners and staff, and is well equipped to build BDO France into a real alternative to the Big 4 and other significant national firms in France - and to support BDO International's own global ambitions.

Also at today's meeting the 2006/7 results for the BDO International network were announced showing that total combined fee income for all BDO Member Firms world wide (including the exclusive members of Member Firms’ Alliances) has again grown rapidly and now amounts to US$ 4,703.8 million – an increase of 20% on last year’s total of US$ 3,911.9 million. Expressed in Euros, the 2007 world wide combined fee income total is EUR 3,298.2 million, representing a growth in Euros of 7%, due to the weakening of the US dollar compared to the Euro during the reporting period. The BDO International network now comprises 626 offices in 111 countries with total people of almost 32,000 - an increase of 6% over last year. New Member Firms joined in China (Beijing), Panama and Trinidad / Tobago. Member Firms in Greece, Norway, Australia and New Zealand concluded mergers which resulted in substantial growth in those areas.

A great set of results and yet more proof (if it is needed) that BDO can provide a truly international and distinctive alternative in the accounting market.

The last few weeks have had a distinctively international flavour for me.

2007-12-03T00:01:00+01:00

As you may have read in the Press, when my term of office as Managing Partner of the UK firm comes to an end in September 2008 I will be taking over as CEO of BDO International. Fortunately, the term of the existing CEO, Frans Samyn, is due to end in September 2008 so the timing is perfect - indeed I wonder if this was preordained!

From a personal perspective I am delighted that I now know what I will be doing when I stand down as Managing Partner and particularly pleased that it involves a wider role within BDO International - indeed the widest role there is. I am nervous about taking on the job which will be very different to a UK only role but am excited about the opportunity to help BDO International take the next step in its development and to help other member firms achieve their ambitions so that BDO truly becomes the sole alternative - to both the Big 4 and other national firms. Frans has done a great job and I hope I prove to be a worthy successor.

On the international front I was also delighted that BDO now has a new member firm in France and one that has great people and ambitious growth plans. It was worth waiting to ensure we could secure a firm of high quality, well able to service our existing clients and with the capability to do so much more.

Sticking with the international theme, last week the UK firm hosted a meeting of partners from a number of Eastern European firms to share knowledge and discuss how we can best help each other. This meeting was arranged before my new role was even contemplated but it was a great opportunity to engage with a number of partners in other BDO member firms both in my role as Managing Partner of the UK firm but also as CEO designate of BDO International. Again, some great people reflecting some high quality firms and again all with ambitions to grow. Perhaps I shouldn't be so nervous of the new challenges I will face next year.

Last night, I had a great evening...

2007-11-15T21:39:00+01:00

... at the Accountancy Age Awards Dinner - topped off by us winning the Employer of the Year Award.

The evening started off well when Gavin Hinks, the editor of Accountancy Age, referred to our recent advertising campaign in his welcome speech and, in particular, to us using the Accountancy Age 2006 Global Firm of the Year Award as our "strapline" on our adverts. Gavin was also kind enough to say he liked our adverts and they were memorable - all very encouraging.

We had taken three tables so I had been able to invite members of staff from all our offices and business units to join me and Tony Perkins, one of my colleagues on the Management Executive. A real change from the usual corporate entertaining and a great chance to spend an evening with a wide range of our people all of whom had been nominated for their exceptional contribution to their business units over the past twelve months.

We were short-listed for four awards - Audit Team of the Year (the shortlist was only ourselves and KPMG - so a real tribute to our audit team); Tax Team of the Year; Global Firm of the Year (I never expected to win this for a second year and it fairly went to KPMG - who had a winning evening); and of course Employer of the Year (always the award I want us to win). This was the last Award of the four to be presented - and almost the last award of the evening - so there were some concerns on our tables given we didn't win any of the other awards we had been short-listed for. But there was no need to worry about us coming away empty handed and I was delighted to collect this award for the third time in four years. As it says it today's edition of Accountancy Age "For BDO Stoy Hayward, winning Employer of the Year will be something of a welcome back, old friend".

A great evening.

I was amused...

2007-11-02T08:59:00+01:00

... by a headline in yesterday's FT - "Tweaks but little threat to Big Four role". I was expecting to read more comment on the "Competition and Choice" debate and whilst the article was about competition concerns it was actually about supermarkets and not the accounting profession.

There is obviously something about "Big Fours" and concerns over their effect on competition!

I chaired a "round table" discussion on Audit Quality and Transparency...

2007-10-29T00:42:00+01:00

... last week based on research amongst investors/analysts carried out by Ipsos Mori. Paul Boyle, Chief Executive of the FRC, was one of the participants and made it clear that the lack of choice in the audit market for large corporates was "a critical issue". He noted that if a major firm were to disappear, or be forced to withdraw from the audit market place, it would lead to a lack of capacity to supply high-quality audits that could not be absorbed by the other firms. He also noted that whilst many might regard such as scenario as improbable the problems at Northern Rock illustrated how people tend to underestimate the chances of a catastrophe - and then claim it was obvious after the event.

As you know I share Paul's view that the lack of choice (and in my view also a lack of competition) is a critical issue although we might not wholly agree on the reasons. Part of the solution is ensuring that more firms than just the "Big 4" are able to take on the audits of larger corporates. This means we need access to that marketplace now if we are to be a credible supplier of audit services to this marketplace in the event of a "catastrophe".

Paul was more confident than I am that the recently published recommendations in the FRC's report on Choice in the UK Audit Market will make a real difference and will do so soon enough. I am not alone in my concerns - a similar view has been expressed by some partners in "Big 4" firms albeit they may not be as concerned as I am that nothing will change.

This discussion still has some way to go.

Reactions to the recently published report on Choice in the UK Audit Market..

2007-10-21T23:56:00+01:00

.. were as modest as the report itself. Of the "dailies" only the FT appeared to have any comment and it referred to "glacial progress". Accountancy Age's lead article focussed on concerns that ".. the conservative approach by the UK.." could result in the US taking the initiative in this area - and it wasn't only me that raised this concern! Accountancy Age's editorial went further and editorial stated that "Boldness a Dirty Word in Audit Choice Reform".

Whilst disappointed I am unsurprised. As I have previously said, without compromise by key players (and this primarily means the Big Four) a market led approach is unlikely to result in any significant change. The Big Four need to judge which is the biggest danger - the risk of regulatory intervention (possibly prompted by the US) or changing their behaviour towards the non Big Four firms in the hope this will be sufficient to avoid such intervention.

Those of us who support a market led approach hope that there will be enough changes of behaviour (and this is not just by the Big Four) to make a real difference and thus head off the risk of regulatory (or Government) intervention.

Is the UK losing out to the US?

2007-10-11T22:18:00+01:00

According to Jennifer Hughes in her column in last week's FT the debate on Competition and Choice "has somewhat fizzled in the UK" and we are now looking to the US to "inject some vibrancy into the discussion as well as the market". This would be a shame.

The UK, and the FRC in particular, took a real lead in this area and at the last public meeting to discuss this issue (back in May) the FRC expressed their confidence that the UK (via the FRC) would continue to lead this debate. As I pointed out then the dynamics of the audit market are very different in the US to the UK - BDO Seidman (our US member firm) for example acts as auditors to 9 of the Fortune 1000 (including 4 of the Fortune 500) and continues to win SEC clients from the Big 4. Indeed over the past few years a reasonably large number of listed audit clients have moved their audits away from the Big 4 - not a trend we are seeing in the UK.

There are competition and concentration issues in the US but the invisible barriers in the UK will only be addressed by action in the UK.

"Don't want to be just another client?..

2007-10-08T21:14:00+01:00

Don't just go to another accountant?" is the poster that launched the next phase of our national brand campaign - reinforcing our focus on client service and ensuring all our clients have an exceptional experience in their dealings with us. All our messages in this campaign stress this focus.

I hope you enjoy reading them but, more importantly, I hope all our clients (current and future)enjoy their dealings with us.