Greedy KPMG and friends eat into the legal profession – FT

EDINBURGH — The Big Four accountancy firms are far more than groups made up of auditors and accountants; these global businesses have stealthily encircled corporates by snatching up the work of other professions. Firms like KPMG are circling the legal profession more aggressively, even though there has been much criticism that KPMG – like its competitors PwC, EY and Deloitte – are too powerful and too compromised to do their core work of accounting. The Financial Times sets out the details of how accountancy firms are muscling in on legal work. This development raises the question of whether KPMG, demonstrably corrupt and working against the effective functioning of democracy in South Africa and elsewhere, is too big and too powerful to fail. – Jackie Cameron.By Thulasizwe Sithole.Accountancy firms are using technology to muscle in on traditional law firm territory, reports the Financial Times. .In March, it points out, the head of the UK's Financial Reporting Council suggested the time had come to consider breaking up the Big Four accounting firms. Stephen Haddrill called on the Competition and Markets Authority to examine the case for "audit only" firms. ."The argument for breaking up the Big Four — Deloitte, EY, KPMG and PwC — and separating their audit function from the range of other professional services they offer looked quite compelling in the wake of the collapse of Carillion, the British outsourcing company which was linked to aggressive accounting practices," says the London newspaper..___STEADY_PAYWALL___."Nor are anxieties about the effect on audit quality of the expansionist ambitions of the Big Four restricted to the UK. This year, the International Forum of Independent Audit Regulators said it had identified accounting failures in two-fifths of the 918 audits of listed companies it inspected in 2017. ."Given that the growth of the Big Four has been particularly pronounced in the legal services market in recent years, leading law firms will be watching the arguments for and against spinning off these companies' audit arms with keen interest. Some argue that the global business and political climate has become less hospitable to the Big Four's designs on the legal sector.".Having surfed the wave of globalisation and the deregulation of legal services around the world that followed the UK's liberalising Legal Services Act in 2007, they now face the twin forces of protectionism and populism, comments the FT. ."These political developments threaten to close lucrative global markets, particularly in emerging economies that are lightly regulated," says the newspaper, asking whether this spells danger for the Big Four's dream of absorbing law-related services into their 'integrated services model'..There is a warning that the death of the Big Four's legal ambitions have been greatly exaggerated. The FT outlines comments that, in the 1990s, the then Big Five (today's Big Four, plus Arthur Andersen) made a concerted effort to move into the legal market.."That attempt foundered in the wake of the Enron scandal, in which Arthur Andersen was centrally implicated and which led to its disintegration in 2002. The so-called Magic Circle law firms grew rapidly as the remaining Big Four drew in their horns. ."Over the past decade, the accounting firms have sought not to replicate the large law firm model but rather to refine an integrated services model that operates at the intersection of tax, finance, consulting, strategy, information technology and project management," says the newspaper..The Big Four are already powerful in gaining legal business. The FT highlights how their legal activities have grown prodigiously: .PwC employs 3,600 lawyers in 98 countries; EY has 2,200 lawyers in 81 countries; KPMG about 1,800 lawyers in 75 jurisdictions; andDeloitte has more than 2,400 lawyers on its books. .One area in which the Big Four do have a head start and which they plan to conquer: harnessing technologies such as machine learning and other forms of artificial intelligence to provide more efficient and better legal services. ."Richard Susskind, author of Tomorrow's Lawyers, an influential study of the future of the legal profession, and a consultant to Deloitte Legal, says: 'What's interesting about the Big Four is their commitment to new technology. They come to a market where they have no legacy to protect, so they are able to start with a blank sheet of paper. It seems to me self-evident that the Big Four will be hoping to emerge as market leaders in legal technology.'."While most leading global law firms will, Prof Susskind says, have 'a story to tell' about innovation and technology, these are yet to have shown a decisive effect either on turnover or on ways of working," says the FT.

Greedy KPMG and friends eat into the legal profession – FT

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