Urgent Call for Big Four Accounting Firms to Increase Pay for Junior Auditors

According to Sir Jan du Plessis, the chair of the UK's Financial Reporting Council (FRC), big accounting firms such as Deloitte, EY, KPMG, and PwC should increase the pay for junior auditors to attract more young recruits to the sector. Senior partners at these firms have claimed that criticism from politicians and regulators, along with high-profile fines, has made it more challenging to recruit and retain auditors. However, du Plessis denied that the FRC's tough approach had made the profession unattractive.

Du Plessis stated that increasing pay could be a solution to attracting people to work as auditors. He pointed out that all the audit firms have seen a significant increase in profitability and have the resources to raise the pay levels for junior employees. However, it is up to the firms themselves to decide whether they want to do so. While average partner pay at the Big Four has soared in recent years, pay rises for junior auditors have been small, failing to keep pace with salary growth in law and consulting.

PwC, for example, raised the average pay for its London-based audit graduates to £32,000 last year, which is roughly half the salary of the City's highest-paid legal trainees. Du Plessis, who is also the former chair of BT and Rio Tinto, stated that the challenges auditors face in recruiting the right people are not unique to their sector. There are concerns that staff shortages will worsen due to increased demand from companies for external validation of climate disclosures, in addition to traditional financial statements.

Du Plessis defended the FRC's approach of naming and shaming audit partners under investigation, despite concerns among accounting executives that senior auditors are leaving the profession to avoid tarnishing their reputations before retirement. He acknowledged that being named publicly is tough and expressed sympathy, but he emphasized the need to maintain high standards in public life. He mentioned that the FRC is likely to avoid naming junior auditors accused of misconduct in the future, to the extent possible.

Last year, the regulatory watchdog faced criticism for publicly identifying a former junior auditor from KPMG and seeking a £50,000 fine against him in an industry tribunal. However, the tribunal acquitted the junior employee of any dishonesty charges and instead found him guilty of lacking integrity, resulting in no fine being imposed.

Du Plessis acknowledged the discomfort and sympathy within the organization regarding the decision to name the junior staff member. He noted that naming defendants who had already left the industry would have a lesser impact on their careers.

The regulatory body, now known as the Audit, Reporting and Governance Authority (Arga), has been experiencing rapid expansion in anticipation of receiving more powers. Du Plessis expressed uncertainty about the timely passing of the long-awaited legislation to establish Arga before the next election. However, he expressed optimism that the current government or its successor would prioritize it "fairly soon."

In the meantime, the regulatory body has been implementing reforms that do not require legislation. It is currently seeking input on updates to the corporate governance code for large UK-listed companies, which would increase directors' responsibility for the accuracy of company accounts.

Du Plessis emphasized the need to hold the individuals responsible for preparing reports accountable, instead of solely blaming audit firms. He acknowledged that auditors' work fell below the required standard in past scandals but cautioned against solely targeting the Big Four firms as convenient scapegoats.

Regarding the government's plan to establish an office for the regulatory body in Birmingham and relocate at least half of its staff there in the coming years, Du Plessis stated that it was not their initial preference. However, he respected it as part of the government's agenda to promote regional development and expressed confidence that the relocation could be carried out at a reasonable pace without necessitating job cuts.