Watching the pennies: Vivien Beattie

Issued: Thu, 20 Jun 2013 15:20:00 BST

The financial crisis has catapulted the areas of audit market research and company disclosure into the spotlight.

‘When the banks failed, there was a cry of “where were the auditors?” And alongside that particular event there’s long-standing concern that there is a concentration of big firms in the audit market,’ says Vivien Beattie, Professor of Accounting. The big four firms, Price Waterhouse Coopers, KPMG, Ernst & Young, and Deloitte, audit nearly all the FTSE 100 and 350 companies.

Professor Beattie’s research into auditor independence and choice led to an invitation to the House of Lords to take part in their enquiry into auditor concentration. ‘One of the outcomes was a referral of the audit market to the Competition Commission. That enquiry is ongoing and I’m involved as an academic advisor.’ The findings will be highly policy-relevant and could lead to limiting the number of companies that the big four audit firms could audit, allowing other firms to get more business. ‘It’s a very, very big deal for the audit industry,’ says Professor Beattie.

Company disclosure is another highly topical area of work. ‘My research is about what they call the front end of the annual report, which is the narrative,’ says Professor Beattie. ‘It’s become increasingly recognised as an important part of the reporting package, and there’s a concern that in the banking crisis there was an overload of information.’ With some of the banks’ accounts running to three hundred pages, it was hard to find key information revealing that they were lending to people unable to repay. ‘There’s a global initiative to marry the words and numbers in the financial statements as a comprehensive whole, and to start the reporting with the business model and strategy. If there’s a clear articulation of that, the rest should fall into place.’