Perrin's View

My dear nephew James, congratulations on your Upper 2nd in Economics. I understand you are keen to train with a'Big Five' accountancy firm and you would like some advice, so here goes.

The "Big Five" are going through a period of significant change. No sooner have these global firms been assembled than they are being torn apart. The original proposition was that the Big Five would provide what they thought their clients were gagging for – a one-stop shop. Whatever they wanted, the Big Five would provide – audit, tax, business planning, IT consultancy, even actuarial advice. Great idea, wouldn't you say?

No, actually, it isn't.

You see, the most profitable service that the Big Five provide is IT and business consultancy. The partners who provide that service started to resent the fact that their earnings were being diluted by the less profitable contributions being made by other services. This has led to the battle in the world's courts by Andersen Consulting to escape from its accounting parent, and to Ernst & Young's consultancy arm being merged with Cap Gemini. Even PricewaterhouseCoopers, the granddaddy of all the global professional service firms, is expecting to spin off its consultancy arm.

But this is not just about the involuntary loss by the Big Five of their most profitable businesses. They are now also engaged in hiving off the least profitable part of their business – audit. The audit was viewed by the Big Five as an ideal base of contact from which to sell other services to their clients. So valuable did the Big Five view this opportunity that they were willing to "buy" it by offering to provide the service for a fee that is substantially less than the cost of carrying out the work. This in turn led to the service provided by the auditors being progressively devalued. In fact, the importance of the selling opportunity became so great that auditors, it is said, became reluctant to say unpleasant things to their clients (which is, in a nutshell, what an audit is all about) for fear of upsetting those partners selling in more profitable services.

A group of quaint and old-fashioned people led by the Securities and Exchange Commission in the US believes in the independence of the audit. In fact, so strongly does the SEC feel about the subject that they are taking steps to forbid auditors from selling other services into their major audit clients. So what we have now is a situation in which audit firms are about to be forbidden from taking the opportunity to offer the other services which it was the principal object of the audit to win. Oh dear!

So, if the most profitable consultancy bits are flying off the top and the least profitable audit bits are being thrown off the bottom, what are the accountants left with?

The Big Five all have excellent corporate finance departments, superb tax teams and brilliant insolvency practitioners. They all have excellent graduate training programmes which would equip you well for an interesting and rewarding career inside or outside those firms.

With best wishes from your wicked Uncle Leslie.

P.S. Each of the Big Five has a small UK law firm. Whether those law firms will go the way of the consultancies or the auditors, I cannot say.

Leslie Perrin in managing partner of Osborne Clarke. He can be contacted at