Interesting thing to complain about

The governance of the firm is still primarily closed – all executives and non-executives are partners of the firm, and there is no cultural/national diversity in spite of it being a global firm and stated aspirations about inclusiveness. Quoted companies have to have independent non-executive directors by law, and this is policed by Big 4 firms, but somehow such a rule does not apply to them.

The independents are there to ensure the executives don’t plunder the shareholders. In a partnership the partners are the shareholders and the executives…..

48 thoughts on “Interesting thing to complain about”

  1. So Much For Subtlety

    and there is no cultural/national diversity in spite of it being a global firm and stated aspirations about inclusiveness.

    No jobs for Dianne Abbott? Shame!!!

    If it is a partnership it is entirely their money and their risk. Someone seems to think that any successful enterprise owes something to the public and the public is entitled to a say in what people do with their own money.

    And by public I mean the usual list of Quangocrats.

  2. as far as I know KPMG is not one global partnership but a series of individual country partnerships linked under the same brand – so the UK firm will by definition include only UK partners, and all cultural diversity will be held in the local partnerships in Azerbaijan or Ghana or India or wherever

    I did have an interesting conversation last night with someone from a different Big 4 company who said that Blockchain is a huge game changer for audit. If the Bank of England’s Bitcoin alternative takes off then *every* transaction in the accounts is traceable and incontrovertible. So a) audit becomes a matter of asking the financial systems the correct question and hitting the button and b) taxation can move from annual/semi-annual/PAYE or whatever onto a daily or even transaction basis. Suspect the major accountancy firms are slightly more worried about that than the LHTD pointing out that there aren’t any foreign types on the board

  3. Quoted companies have to have independent non-executive directors by law

    Interesting. But wrong. Companies Act 2006 requires directors to exercise independent judgement (s173), but it doesn’t make any distinction between executive and non-executive directors.

    The Stock Exchange Combined Code is not “law”. And, of course, you can be a quoted company on another exchange that does not require compliance with the Combined Code.

  4. “Somehow” here stands in place of “something I should have bothered to research before starting to write about the issue”.

  5. May I hereby state my availability and willingness to be appointed an independent non-executive member of Tax Research LLP?

  6. > “there is no cultural/national diversity”

    How would they audit the books of e.g. a Malaysian-UK joint venture, if they didn’t have any Malaysian accountants? Repeat for the rest of the world. I’m pretty sure KPMG have a very diverse workforce.

  7. ken,
    But in the case of a joint venture, you’ll need e.g. Malaysian accountants in London to work on that audit. In general, since London is home to a large number of multinationals, they’ll need quite a few national experts.

  8. Always bear in mind that Ritchie’s particular hatred for KPMG may be influenced by the fact he worked for Peat Marwick.

  9. Ken, AndrewM and GlenDorran. As you are all probably aware Big4 firms are very unlike corporations. The head offices are very small and exert very little influence over national partnerships (necessarily both because of regulations and the nature of partnerships). I have heard the culture at least one large firm that is nor part of the Big4 as being a co-operative of sole practitioners. The lack of diversity is quite understandable both because of the requirements for specific qualifications and experience (a US tax practitioner is not going to transfer to do the same in France unless they are advising US multinationals), but more generally because unlike in corporation where it is easy to push the diversity agenda, in a partnership with liabilities for the partners, existing partners are always going to be more cautious about admitting partners who don’t fir the mould on whom they would be putting their own capital at risk.

  10. The lack of diversity is quite understandable …in a partnership with liabilities for the partners, existing partners are always going to be more cautious about admitting partners who don’t fir the mould on whom they would be putting their own capital at risk.

    Plus, partners will be very much aware that it is *their* money which is being pissed away on diversity programmes, as opposed to shareholders’.

  11. Hmm. I understood accountancy firms now mostly traded through LLP – limited liability partnerships. Audit partners are required to not limit their liability for their audit opinions, but cover with insurance. A requirement for a practicing certificate. Given the size of the big 4, the notion of all the individual partners even knowing each other is ludicrous! On the other hand, nowadays a partnership is not for life.

  12. @Alistair. I’m reasonably senior in one of the big 4. The fact that not all partners can reasonably know each other only raises the bar “not only am I looking to see if you might destroy my Capital, but I’m looking to see if you are the sort of person who would in turn appoint another Partner who might destroy my Capital.”

  13. The Big 4 are all networks of independent member firms. In each case there is a central “structure” that helps co-ordinate the member firms and promulgate standards and initiatives. The strength of that central function varies among the Big 4 with KPMG probably having the weakest function. The UK member firms of the Big 4 are subject to the FRC Audit Governance Code which does require independent non-execs and the production of a Transparency Report. There are proposals to bring more elements of the Corporate Governance Code into the Audit Code which should (in the words of the FRC):

    ‘Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities…The proposed new provisions will strengthen this voice further, provide clarity about the Code’s purpose particularly in relation to audit quality and encourage further transparency to investors,’

    #fullofshitevenaboutthethingsheisactuallytrainedtoknowabout

  14. My favourite diversity joke from a junior manager at a Big Four firm. “My team is very diverse: I have one from Peterhouse, one from Emma, one from Downing, and one from Oxford.”

  15. Anyway, Murphy can shut his neo-colonialist trap – he knows nor cares nothing about diversity when it comes to his imperialist tax ambitions (“close down any country that levies tax at a level Murphy disagrees with”).

  16. Bloke not in Cymru

    Maybe he’s just unhappy that the non-exec offers aren’t rolling in and is just trying to push for a market he thinks he might more have a chance in

  17. Meanwhile over in Ritchieland ‘Andrew’ completely destroys RM’s position and those of his fan club, with a very professional analysis of the KPMG accounts.

    Quite surprised Ritchie published it – probably didn’t understand as he is now looking for porn stars!

  18. Always bear in mind that Ritchie’s particular hatred for KPMG may be influenced by the fact he worked for Peat Marwick.

    He finished his training, qualified, then left.

    Actually, he was an intern for KPMG and nothing more. They declined to hire him on after his internship was over. Can’t imagine why, though.

    By the way, the above is per Murphy himself. He disclosed it on his web site about six or so years ago.

  19. Jeeze, I’ve been out of accounting too long. I still thought Big 6 (!). Though I was knee deep in Sarbanes–Oxley until 2009.

  20. Murphy no longer publishes my comments. I asked him about the Audit Code thing about Non execs. I guess he thought I was referring to his member status.

  21. And now, the world will be deprived of the Murph bangs Polly film opus that every sentient being has been longing for. Sorry folks.

  22. Actually, he was an intern for KPMG and nothing more

    Really? I had always assumed he articled, qualified, and then practiced there for a time. In a way, it is reassuring – the big eight (as they would’ve been in Ritchie’s time) have always tried to maintain quality control on their intake. Thinking they let in a prat like him really made me wonder about KPMG. I assume that it was the Peat Marwick Mitchell predecessor.

  23. … I just checked his (ten years out of date) CV at TRUK – he was with PMM for four years, which looks like a normal articling period (±), but it would appear he hit the road shortly after designation. I go back to my doubts about PMM/KPMG, although to be fair, there will always be some who slip through the net.

  24. Dcardno, in those days the supposition was for qualified trainees to go out into industry. Maybe 20% stayed in practice, the rest went into industry or into small practice like Murph

  25. … I just checked his (ten years out of date) CV at TRUK – he was with PMM for four years, which looks like a normal articling period (±), but it would appear he hit the road shortly after designation. I go back to my doubts about PMM/KPMG, although to be fair, there will always be some who slip through the net.

    I must have got a bit garbled, or – and this is far more likely – Murphy got his own work history garbled. Christ, he can’t seem to keep anything straight, so why would his own work history be any different?

    As for Murphy hanging around for as long as he did, there isn’t too much to be made of it. The 1st four years are as a staffer and then a low level in-charge. Pure grind it out grunt work. Been there, done that. The end of Year 4 would be about the time the partners would have to think long and hard about promoting someone to a senior in-charge, because that’s were true responsibility begins…

  26. This comment from the thread is just delicious:

    ‘I should add, I use an LLP’

    There are obviously significant differences between a partnership and an LLP. I have no doubt that the non-executive directors of your own structure fully support your work, but still perform the oversight function so absent from the likes of KPMG

  27. Murphy really is a lying cunt.

    In an earlier thread he decried the tax paid by KPMG partners and claimed it was probably mostly PAYE (although what difference that would make anyway I can’t work out). It was clearly demonstrated that his claim was nonsense as KPMG don’t have salaried partners.

    Yet he makes exactly the same claim a few threads later.

    Cunty, cunty, cunt.

  28. @Dennis: I doubt that Ritchie was an intern at PMM. These things were fairly rare in the early 1980s and I doubt that one of the few available would have gone to Murphy from a second tier university like Southampton (OK-ish but not as “elite” as Oxford/ Cambridge/ Durham/ Bristol/ Edinburgh/ LSE/ Imperial/ KCL/ UCL and others – apologies to any I have offended by omission).

    Looks to me as though he joined in the general graduate admission, qualified with PMM and was cut at the first appraisal after his exams/

  29. The Meissen Bison

    Alex: apologies to any I have offended by omission

    What about causing offence by inclusion? The final eight, to be specific, from your list.

  30. OK, on a stricter definition where “elite university” means one where more than 50 undergraduates at the university went on to become Nobel Laureates, that just leave one UK university (not the first on my list) and Harvard.

  31. Okay, but where do they get the people they send out on audits?

    I’ve always assumed they were work experience boys and girls. Find them an office, remove any sharp objects and show them where the toilets are.

    There’s often some sort of babysitter as well, but I thought they were teachers.

  32. Jack C

    Universities. I don’t think any chartered firm accepts people without university degrees these days, unless they have some kind of accreditation such as AAT.

Leave a Reply

Your email address will not be published. Required fields are marked *