Jim Armitage: Revamp for the Big Four in audits is starting to add up

The collapse of Enron feels like a tiny pebble in the road compared with the financial cataclysm five years later.

But when it comes to Arthur Andersen’s failures during that crisis (the auditor got too chummy with the executives it was supposed to be policing), it still reverberates.

The scandal triggered a long process of rethinks over how to make audits more thorough, and prevent the suits doing them from going too native with the clients.

In recent years this morphed into a ruck over whether it was healthy that the Big Four accountancy firms were so dominant in audit.

Cue regulations forcing companies to put their audits out to tender every 10 years.

At least that way, the authorities figured, smaller firms would get a look in once in a while.

The big boys, and their clients, complained bitterly about disruption and expense. But the bleating was ignored and the rules enacted in June.

Some companies started to move ahead of the deadline. Barclays shifted from PwC after a 120-year relationship. Tesco dumped the same firm after 32 years.

Surprise surprise, the sky did not fall in. Far from it.

In fact, as one of the country’s top auditors begrudgingly admitted to me this week, in many cases it’s proved rather helpful. Fresh eyes are picking up a fair bit of odd practice and bringing about healthy change, he said.

The rotations are gathering pace. BP, BAE Systems, Legal & General and GlaxoSmithKline audits are up for grabs. This is big money: EY billed BP $47 million last year. GSK paid PwC £27.5 million.

Britain’s golf clubs may suffer from the end of the cosy audit relationship, but employees and investors will be a little bit safer.

Marmite Wars prompted a mixed postbag at Evening Standard Towers. Most readers backed Tesco’s fight but some, particularly in the food-supply game, supported Unilever for making a stand.