With the Big 4 Accounting firms seemingly moving towards greater integration with a view, inter alia, of ensuring closer control and therefore managing risk more effectively, an interesting debate is developing. In very simple terms, greater control reduces risk by ensuring more consistent standards through an enhanced quality control process BUT evidence of greater control will increase the risk of firms being held vicariously liable for the failings of others within their network.
So, a classic case of swings and roundabouts, helpfully explained in the 16th September edition of the International Accounting Bulletin (IAB). But is the correlation between integration, risk management and vicarious liability as clear cut as is perhaps being suggested? I suspect not.
Nothing is black or white in this area, but talking to the MSI members around the world, there is a strong belief that the business model that leaves strong local firms in control of their own destiny, and requires them to take responsibility for their own actions - or inactions - not only fits better with the culture within which these firms want to operate, but may also be a significant driver in terms of driving standards up - and, consequently, driving risk down.
Time will tell.
James Mendelssohn (jmendelssohn@msiglobal.org)
