Negative headlines are yet again making a dent in our reputation.

What can we do to restore the public’s confidence in the profession?

PR-wise, 2017 wasn’t a good year for the Big Four. Who can forget PwC making a shambles of the Oscars ceremony?

More seriously, the year was punctuated with announcements of the FRC launching regulatory investigations over audits at BT, Rolls-Royce, Mitie Group and so on. Then, the Paradise Papers scandal broke in November, exposing the Big Four’s widespread use of offshore avoidance structures to help some of the world’s largest businesses and the rich minimise their tax bills.

Mark Taylor, director at accountancy firm Duncan & Toplis, says: “It went further than simply highlighting the activity. As the important distinction between illicit tax evasion and legitimate tax avoidance became blurred, people began to question the morality of such schemes.”

The responsibility of the Big Four

Roll on 2018, and all the Big Four are in the negative spotlight again, this time over the audit and collapse of Carillion. The firms have been accused of “feasting on the carcass” of the business having collected more than £70m in fees over the last few years, including £6.4m paid out in total to EY, KPMG and PwC just one day before the £10m bailout request refused by the government.

On top of this, recent experimental study suggests that the Big Four’s independence and professional scepticism may suffer from the “alumni effect”. Researches in the US have found that auditors are more willing to accommodate less conservative accounting policies at a client when the CFO is a former engagement partner from their firm, and are more confident in the CFO’s position when the CFO has been a partner in any of the Big Four.

But Matt Baldwin, managing director of professional services PR firm Coast Communications, thinks the Big Four are always going to be an easy target. “Their reach is such that they will be involved in pretty much every facet of corporate life – auditor, tax adviser, consultancy. So when something goes wrong with a client, they will always be under the spotlight.”

The reputation of accountants

But does the negative press the Big Four receive damage the reputation of the wider profession? “I’m not so sure,” says Baldwin. “The accountancy profession is bigger than that.”

Phil Hall, head of Public Affairs at AAT, confirms that not one of AAT’s 140,000 members – whether a full member, licensed accountant or student – was embroiled in the Paradise Papers scandal, or in the Panama Papers one 18 months ago. “This does highlight that some in the media and a number of politicians do us all a disservice when seeking to tar the accountancy profession with the same brush.”

However, Baldwin points out the profession as a whole is not off the hook. “Threats to reputation also come through the management of accountancy businesses – recruitment practices and gender pay gap can create significant problems that cannot be ignored.”

Social mobility

A report from the Bridge Group has revealed that although the bigger accountancy firms have taken actions to improve social mobility, they could do more to make the access to the profession easier for trainees from challenging socio-economic backgrounds.

As for the gender pay gap, it’s just been announced that PwC has the biggest pay gap of the Big Four at 43.8%. Deloitte, KPMG and EY are not far behind, at 43.2%, 42% and 38.1% respectively.

We need to reach out to schools in less represented parts of the country to demonstrate the value of a career in accountancy

How do we fix this?

The FRC is now calling for an enquiry into the possibility of breaking off the Big Four’s audit arms into separate businesses, in a bid to enhance healthy competition and to restore confidence in the sector.

Naturally, the Big Four will resist this. Stephen Griggs, Deloitte’s managing partner for audit and risk advisory, says:

“We do not believe there is a case for breaking up one or more of the firms. The quality of our audit is improved by being able to access specialist resources that sit outside of our audit business, for example within data analytics or tax.”

Instead, Griggs proposes a debate around the expectation gap between what an audit does and what people think it should do. “This gap is significant and it needs auditors, investors, regulators, standard setters and the wider public to work together to better understand the causes of this gap and find solutions to close it. We are very supportive of such a debate.“

Perhaps the fines for poor audit practices should be higher, too?

Last August the FRC fined PwC £5.1m – the highest fine imposed to date – for the firm’s audit of RSM Tenon in 2011. But an independent review led by former Court of Appeal Judge Sir Christopher Clarke has suggested that penalties be bumped up to £10m for large firms who have carried out “seriously poor” audit work.

Jon McLeod, chairman of Corporate, Financial and Public Affairs team at public relations firm Weber Shandwick, says: “The FRC certainly needs to form a point of view on the issue. We cannot treat this as ‘business as usual’, when you have a collapse like Carillion, there’s just too much collateral damage – jobs, services, investors all get harmed. However, we also need to look at the obligations on directors to wake up and smell the coffee when things are heading only in one direction in a failing company.”

Steve Hale, partner at Perrys Accountants, doesn’t think higher fines would necessarily change anything. “If we were to fall short we risk losing our status as auditors, with a significant effect on our business. This, rather than larger fines, is a bigger incentive to ensuring that we maintain higher standards.”

Elsewhere, it’s really down to us rather than any watchdog.

The value of the accountant

As a counter to the Bridge Group report, Grant Thornton and KPMG ranked first and second in the Social Mobility Employer Index last year, and the other big firms all appeared in the top 20. This shows that things are changing for the better, albeit there is plenty of room for improvement

“We need to reach out to schools in less represented parts of the country to demonstrate the value of a career in accountancy and the multiplicity of opportunities it offers,” McLeod says.

He adds: “Offering different pathways into the profession, like the AAT, will also promote a far more diverse spread of individuals.”

Currently, approximately 20% of AAT’s 90,000 students are apprentices, and a large number are from Black, Asian and minority ethnic (BAME) backgrounds.

Also, in 2016 nearly 70% of AAT members were women. This compares extremely well with other accountancy bodies such as ICAEW (28%), ICAS (33%), CIMA (35%), ACCA (46%) and CIPFA (32%).

Diversity in the industry

Hall adds: “AAT published its gender pay gap data as part of its annual report long before it was legally required to do so, and it was the first and remains the only accountancy body to have signed the Women in Finance Charter.”

On the points of professionalism, integrity and ethics, we must continue to improve standards to reduce the opportunity for criticism in the future.

“There is an argument for a stronger focus in training and CPD on [what it means to act in] the public interest,” says McLeod.

AAT and the other professional bodies issue Professional Conduct in Relation to Taxation (PCRT) guidance to their members on how they should act when involved in tax work. But AAT’s CEO Mark Farrar thinks the government should play a stronger hand in simplifying the UK’s tax regime. “It’s something we’ll continue to push for.”

Without this reform, there will be another case of Paradise Papers, and the public will again question the ethics, morality and fairness of our work.

Champion the positives

But what can we do in the meantime?

“What remains important is that we continue to offer bespoke tax advice suitable to clients’ circumstances and that we help them achieve their objectives in a tax efficient way and within the existing legislation,” says Taylor.

We do ensure that millions of businesses across the UK do the right thing. “But we must all continually champion the positives in the profession and build a better brand for accountancy by shouting about the work we do,” Farrar says.

Perhaps we should shout a little louder? “Yes, even though this doesn’t come naturally to us accountants,” says Hale.

Iwona Tokc-Wilde is a business journalist.