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Big Four told to keep lawyers and accountants apart

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Competition and Market Authority stops short of banning accountancy giants from legal sector altogether

The Big Four accountancy giants should be made to split their fast-growing legal practices from their audit work, an influential government regulator recommends today.

Deloitte, EY, KPMG and PwC need to put strict Chinese walls between their professional services people and their auditors in order to improve the quality of their auditing, according to the Competition and Markets Authority (CMA).

The regulator has been looking into the structure of the audit market amid concerns that the Big Four firms are too dominant despite not doing a very good job.

One of the CMA’s four recommendations is an “operational split” between audit and professional services within each firm. None of the Big Four are solely focused on accountancy any more, with things like management consultancy and — increasingly — legal services making up a larger share of the business than old-fashioned bean counting.

The CMA wants the audit business to have its own chief executive and board of management, with no profit sharing between the two sides of the business. That way, it reckons, management of the audit business will be able to focus on doing their clients’ accounts properly, rather than being distracted by shiny professional services activities.

One non-audit insider at Deloitte told Legal Cheek: “Generally I think it’s a good idea. The Big Four have become too powerful”.

The regulator decided not to recommend that the non-audit businesses be spun out completely. It thinks that an internal operational split, falling short of separation into two new firms, will be enough. The CMA also declined the radical step of banning the Big Four from the legal and professional services market altogether.

All this could happen within 12-18 months, if the government were to back it. The CMA points out that “the audit firms have all the expertise needed to implement this remedy quickly and effectively”.

All four accountancy giants now have a bridgehead in the UK legal market, with Deloitte the last to pick up its alternative business structure licence last year. In November 2018, KPMG announced plans to double its global complement of lawyers to 3,000 — which would make it one of the biggest law firms on the planet.

In a way, this would only be a reversion to type for the Big Four’s lawyers. PwC Legal was a separate entity as recently as 2016, as a committee of MPs pointed out in a separate report published earlier this month.

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51 Comments

Anonymind

A genuine question: how “good” are the law departments of said big four firms?

PwC/EY already have very developed legal departments handling what seem good deals and transactions. Deloitte and KPMG are investing with a view to expand legal services rapidly.

To which firm(s) could you compare the quality of the above legal departments? Maybe something comparable to bulk mid/market ones?

Please no trolls, would also be very nice to hear from people who have trained/work at these firms as lawyers.

(23)(0)

Kronos

It’s a decent question. Good to have some serious legal discussion on this website for once.

Yeah, they are pretty solid. Some good lawyers in there. I’d say among the best in the UK, but if they ever dared step into the LA media, PI, and adhesive-regulation market, Greenberg Glusker LLP would eat them alive.

(20)(18)

Anonymous

It’s important to remember that when Greenberg Glusker LLP refer to PI, they mean their Private Investigation services.

(8)(3)

Anonymous

Fuck off with the GG ‘jokes’. Was never funny.

(14)(11)

Kronos

Oh no, looks like someone got rejected for a GG LLP TC.

Were you not top, top, top, top titanic enough?

(10)(9)

Anonymous

Witty.

Kronos

You LPC keyboard warriors should learn to respect a true titan.

If I didn’t have this Paraguayan-Rhodesian merger to structure I’d box your ears.

sTEPHEN

There is no such thing as a good lawyer. Parasites. They suck the living juice out of everything and they produce NOTHING except misery/ I loathe lawyers. You brood of vipers produce only misery you horrid drinking parasites

(0)(0)

Anonymous

Are these firms any good at motor claims? Asking for a friend approaching qualification.

(13)(3)

The curious one

Do the top 4 offer training contracts? If so, is it worth applying? Or would the training be quite limited when compared to private practice. Appreciate suggestions!

(4)(0)

Anonymous

I know someone ‘training’ at one of the big four.

The TC is not structured well at all, and frankly is nowhere near as comprehensive or challenging as private practice. It sets you up for continuing to work in-house but I feel trainees would struggle if they tried to move into PP.

It’s certainly easier though if that’s what you’re looking for, the hours are great and you don’t have to record time on anything etcetera.

(13)(6)

Anonymous

What is the TC application process? Aside from PwC, I cannot find any information on this for the others!

(1)(1)

Anonymous

Trainees at these firms are not ‘in-house’. PwC for example has their own separate legal in-house team.

(6)(2)

Anonymous

Deloitte is in house

(1)(1)

Anonymous

A. You do have to record your time
B. The work is challenging and rewarding and you learn so much more than you would than in PP considering everyday you’re working w/ tax, actuary, deals etc. – so in fact it is more comprehensive, challenging and holistic that PP.
C. It’s not in-house at all so doesnt ‘set you up to continue working in-house’ and the clients they work for are absolutely massive
D. It’s not any easier than any other firm.
E. Knowing someone who works there and actually working there is a big difference so take it from me who actually works in legal at one of the Big 4

(11)(15)

Anonymous

I work at Deloitte and am not required to record my time.

(11)(1)

Anonymouse

At PwC you do

Anonymous

Using capital letters to list… you can stay at PwC; never leave there, ever.

(7)(5)

Anonymous

Worked opposite a Big 4 legal team on a deal recently. The quality of work was extremely poor but they also seemed massively overworked (contrary to what I would have expected).

(0)(0)

Anonymous

Why would anyone train at these firms? Utter waste of everyone’s time

(12)(8)

Anonymelting

This is not a very smart comment.

You do realise that the quality of deals that PwC and EY handle is very high?

Corporate law department is handling mid-market and above M&A deals (something which the vast majority of City commercial law firms doesn’t do!).

For example, when EY started their department, they hired a lot out of associates out of SC/MC and US law firms. So now you’ll have manageable hours working under very well seasoned mentors.

These are all factors which make for a very good level of training.

(8)(7)

Anonymous

One of the aforementioned firms had a 0% retention rate. Don’t kid yourself.

(6)(0)

Anonymous

PwC’s most recent retention rate is 100% fyi.

Anonymous

What’s the trainee pay at PwC Legal and Deloitte like?

There is no information about this online. Good pay + good hours could be an attractive proposition for many wannabe lawyers

(4)(2)

Anonymous

Answers to this question arevery welcome due to the lack of information available regarding trainee (and NQ) pay at the big 4 accountancy firms.

Money is an important factor when determining where to apply and the lack of transparency is, quite frankly, incredibly frustrating and unfair.

I’m a second year student currently deciding whether to go down the private practice route or an alternative less frequented route – any information would be greatly appreciated…

(9)(1)

Anonymous

*are very

(0)(1)

Anonymous

PWC is on this site you lazy toad. £39k, £44k and £63k.

(12)(0)

Anonymous

These figures are also outdated.

(0)(0)

Anonymous

PwC shows the salaries because it has PwC Legal section so this is clear. What about Deloitte?

(0)(0)

Anonymous

Actual lol

(0)(0)

TBH

“An important factor” I’d honestly say it’s by far the biggest factor, like 99% of my legal career decision making is based on salary + likelihood of obtaining it. Meaning yeah commercial barristers make phat stacks, but thats impossible to get into, I might as well try to become the next hit youtuber if I’m going down that route. Big Law solicitor is a far more realistic option, hard though it may be, and within that world I’d be surprised if virtually every single lawyer wasn’t driven purely by financial motives. Harp on about culture and perks, anyone would jump at the prospect of 150k NQ or 3mil partner.

(6)(0)

Anonymous

About tree fiddy per annum.

(7)(2)

Anonymous

Pay is absolutely shite at both Deloitte and PwC

(1)(0)

Anonymous

You’re lucky to get 45k at qualification tbh, shambles

(0)(4)

Anonymous

The companies make so much money though I don’t understand why they would pay so badly?

(3)(0)

Anonymous

They don’t make that much money for the benefit of twentieth rate NQs

Anonymous

Savage

Anonymous

For real? If true that is shocking.

(0)(0)

Anonymous

That’s just completely incorrect…qualification pay is in the region of 65K. As a trainee the pay is also really good for the work hours you are expected to put in.

(2)(0)

Anonymous

Yes that’s only at PwC…

Kirkland MegaLad Trousering Top Whack NQ

Don’t you mean 145?

(10)(0)

Anonymous

The former LCJ declined to allow The Institute of Chartered Accountants in England and Wales (ICAEW) to regulate all reserved legal services and the ICAEW recently lost an appeal against that decision. That to my mind speaks volumes about the confidence the government has in the Accountants to properly acquit themselves. How long would it be before we saw the current malaise we have with auditors mirrored in the conduct of so called big four accountancy legal firms. The accountants do not even have an independent regulator. As accountants can effectively regulator shop, the in-house crew will never take a robust approach. Even the tiny little Irish accountant body has split away its regulatory function (carb.ie), I wonder why the ICAEW does not follow suit? #verycosy

(6)(0)

Anonymous

Please tell me more bro

(2)(0)

Trainee

I did 90128 seats in audit, it was really fun mayteeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

(1)(1)

Anonymous

show me the money

(0)(0)

Anonymous

They should have banned them. These firms are toxic, AND useless.

(8)(4)

Walter

So are the “challenger” firms. Grant Thornton is culturally worse than the Big 4.

(3)(1)

Anonymous

Culturally? Swear Grant Thornton is investigated more than all 4 combined ? seems like it in the news.

(8)(0)

Anonymous

Thanks to Legal cheek for sweeping out the capital letter listing drivel. Its existence was bringing the profession into disrepute.

(1)(4)

Worried Slaughters corporate partner

*sweats in silence*

(0)(0)

FmrCityLawFirmWorker

Nice story but Law makes up a tiny part of the non-audit revenue at Big 4 firms. Splitting up the Big 4 in the UK, if it happens, won’t primarily be because of Big4 desire to provide legal services.

Bear in mind that internal risk management rules prevent non-law firms from providing legal services in the US anyway. Hence the PwC alliance with Fragomen and Deloitte with Berry Appleman and Leiden. Unlike audit, legal services are not a global offering. For KPMG to claim it will double its numbers to 3K lawyers, this will not touch the vast armies it can muster for Advisory, Tax and other non-audit work.

(There is of course huge potential for synergies across professional services, which IMHO is a topic which should be explored in more detail.)

Separate but related observation: The topic of audit methodology, increasing reliance on tech and how to enforce quality control issues seem to have been skirted. This is addition to the downward trend in what clients want to pay their auditors (and putting in a wide range of RFP requests for “client value add”) also need to be discussed.

Very easy to say “institute operational split between audit/non-audit” or “audit jointly with smaller firms” … we don’t know how that will play out. Perhaps worse audit outcomes? Perhaps increased concentration with one provider, as there will be no restriction on selecting a Big4 as auditor and then its separate and distinct non-audit side for consultancy, internal audit, cybersecurity etc?

(1)(0)

Comments are closed.

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