38 1GM Wednesday October 14 2020 | the times
Business
BDO is now the auditor to more listed
British companies than any other
accounting firm.
It marks the first time that a player
outside the dominant Big Four of PWC,
KPMG, EY and Deloitte has led the
industry by number of listed audit
clients, suggesting that they are losing
their grip on the sector amid growing
pressure for an overhaul of corporate
auditing.
BDO now audits 310 businesses that
are members of London’s main market
or of Aim, the junior stock market, after
business outsourcing services to
clients.
The broader accountancy industry
has drawn intense scrutiny in recent
years after a series of corporate failures,Rival breaks Big Four’s audit stranglehold
attracting 35 clients in the year to
October, according to figures from
Adviser Rankings. The firm has edged
ahead of PWC, which has 307 listed
audit clients. KPMG was third with
260, EY was next with 225 and Deloitte
fifth with 198.
However, the Big Four still dominate
the auditing of Britain’s largest listed
businesses and BDO’s gains are mainly
thanks to a rise in clients among
smaller companies. BDO has no audit
clients in the FTSE 100 and only 17 in
the mid-cap FTSE 250 share index.
Scott Knight, 50, BDO’s head of
audit, said that its growth had beendriven by attracting clients who fell just
outside the FTSE 250. “I’m not sure the
Big Four are focused on that market
any more,” he said.
PWC, its main rival, lost clients over
the past year. The Big Four group’s
roster of listed audit clients has shrunk
by 46 from 353 a year earlier, the
Adviser Rankings’ data shows.
BDO is Britain’s fifth largest
accounting group by revenues and has
about 80,000 staff working from more
than 1,600 offices in 162 countries,
including 5,500 employees in 17 offices
around the UK. As well as audit
services, it also offers advisory, tax andincluding the collapses of Carillion and
Thomas Cook, called into question the
quality of the audits they had received.
There are concerns about conflicts of
interests between accounting firms’
auditing divisions and their other busi-
nesses. The Financial Reporting
Council, the industry regulator, wants
the Big Four to split off their audit prac-
tices from their consulting businesses.
The FRC said in July that its annual
inspection of audits by the seven largest
firms, including BDO, had found that a
third were substandard. BDO’s Spanish
division has been caught up in a fraud at
Pescanova, a fishing business, and is
said to be exposed to costs amounting
to about €100 million.
Lord Sikka, professor of accounting
at the University of Sheffield, said that
audit quality remained a concern. “To
some extent, I suppose, one might
welcome that there is a diversity of
suppliers, but that should not really
take our attention away from the real
issues about the ability to deliver robust
audits,” he said.Ben Martin Senior City Correspondent
BDO’s London office at 55 Baker Street
serves clients throughout the UKJonathan Ames Legal Editor
Slaughter and May to
reinstate partners’ pay
Partners at Slaughter and May —
thought to be the highest-paid lawyers
in the City — will receive salaries again
after they were suspended in April as
the coronavirus took hold.
Senior officials at the firm, where in
good times partners are understood to
be paid on average £2.9 million each,
confirmed that quarterly partnership
distributions had been reinstated, but
annual salary reviews were still on hold.
The Times understands that bosses
have not decided if annual bonuses will
be paid this December as normal.
At the height of the lockdown in
April, Steve Cooke, 61, the senior
partner, was said to have told col-
leagues in an email that all “discretion-
ary distributions to partners” had been
suspended and that those funds were
“being retained in the business”.
Mr Cooke’s message went on to
clarify that in “normal times” those
distributions would have constituted
“nearly all the payments made to part-
ners”.
About a month after it put the brakes
on partnership pay, it reduced its start-ing salaries for newly qualified solici-
tors by 5 per cent to £87,000.
Slaughter and May, one of the City’s
five elite legal practices, is unusual in
that all its partners have full equity in
the business. They do not receive basic
salaries with top-ups; their entire remu-
neration is discretionary payments.
Most City law firms, including the
others in the “Magic Circle” — Allen &
Overy, Clifford Chance, Freshfields
Bruckhaus Deringer and Linklaters —
have tiered structures that include
junior equity and salaried partners. In
April, Freshfields and Linklaters said
that their partners’ pay based on reve-
nues for the fourth quarter of last year
had been suspended. Linklaters restart-
ed its distributions in July, albeit at a
slightly reduced level. A spokeswoman
for Freshfields said that the firm would
not comment on its present position re-
garding partnership pay.
Clifford Chance suspended its March
distribution of equity partner pay-
ments, but they were reported to have
been resumed in August.
Slaughter and May would not com-
ment on the detail of its move to re-
instate distributions to partners.Companies have just one week to dis-
close incorrect claims made on the
state furlough scheme or risk being
subjected to a “gloves off” investigation
by the tax authority.
In July, amid mounting fears of abuse
of the coronavirus job retention
scheme, HM Revenue & Customs gave
employers a 90-day amnesty to come
forward with errors.
For payments received before July
22, the amnesty period concludes next
Tuesday. The same applies to incorrect
payments made under the self-employ-
ment income support scheme for
people who work for themselves.
The job retention scheme that was
announced by Rishi Sunak in March
provides employers with up to 80 perTime is quickly running out
for furlough scheme claims
cent of the salary cost of furloughed
employees who cannot work because
of the pandemic, up to a maximum of
£2,500 per month per employee. As of
September 20, 9.6 million jobs had been
furloughed across 1.2 million employ-
ers, with claims amounting to £39.3 bil-
lion.
Last month, the government said
that up to £3.5 billion may have been
claimed fraudulently or paid out in
error. The scheme is due to close at the
end of this month.
Richard Morley, partner in tax
dispute resolution at BDO, the
accountanting group, said: “Given that
HMRC has clearly started to actively
follow up on tip-offs and potentially in-
correct claims, including recent arrests,
businesses and individuals should start
reviewing their furlough claims now.”James Hurley Enterprise Editor