Finance Monthly - October 2021

29 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s Before some of these challenger firms can take on large and complex audits, they will naturally need to invest in their audit capabilities in order to give confidence in their ability to audit some of the most complex businesses. Such investments may not be financially feasible for firms of a certain size, meaning we could therefore see fewer challengers entering the space, this is an excellent opportunity for professional service firms that have grown and significantly increased their experience here. This is an excellent opportunity for many firms to expand their experience, taking on the audits of larger companies. Nevertheless, some challengers may not want to enter such a high risk space, especially if they perceive proposed shared audit structures to mean these increased risks will not be matched by the rewards. Additionally, some other firms may instead wish to focus on non-audit services, resulting in less choice for businesses, proving counterintuitive to the intended outcome of the proposals – an impact that could become even starker when, in due time, the elements of the operational separation requirements are also applied to these smaller, challenger firms. It will therefore be essential for challenger audit firms to evaluate the investment needed to be able to take on more complex and demanding audits andstart toplanhowtoposition themselves in the future. While they naturally carry increased risks, the potential long-term rewards are great not only for individual challenger firms but for wider industry health and staying ahead of the curve, as the UK professional services sector has done so successfully for years. Independence of the Big Four’s audit and consultancy services is crucial. While we are seeing a number of challenges with shared audits, other methods to diversify the sector also offer significant potential and must be explored as professional services seek to diversify and seek to stay ahead of the curb. We cannot risk jeopardising the independence of audits for UK firms because of lucrative consultancy services provided by the same client, as much as we cannot risk the quality of audits due to lack of experience. Almost as important is the issue of ‘perception’. The public must perceive audits as independent at all times in order to avoid their losing faith in the market, making these diversification processes more essential than ever. At Theta Global Advisors, we do not audit and hence, we are one of the few truly independent accounting advisory firms for non- audit professional services. Mid- sized firms such as ours that are disrupting the industry in a truly unprecedented manner are seeing great success having worked on major accounts this year. Kwasi Kwarteng’s proposals for shared audits working with the Big Four is just one way we can attempt to seamlessly diversify the sector, with mid-sized firms having shown they can take on previously inaccessible, large clients already without necessarily the need for shared accounts with larger, Big Four firms. For London to continue as a top choice globally for professional services, it is essential to stay ahead of the curve moving forwards, be that through shared audits or caps on the Big Four’s existing monopoly. Chris Biggs Theta Global Advisors