The best way to bring companies to book

PwC's Ian Powell believes attempts to break the grip of the 'big four' will only weaken audit quality.

Ian Powell smiles when clients can't place his accent. "It's a bit mixed up," the 55-year-old concedes, with a slightly nasal Midlands twang here, a deeper Northern inflection there. "I worked in Birmingham from '77-'91, Manchester '91-'99, and my family is in Cheshire."

Today, the PricewaterhouseCoopers UK chairman sits with his back to the window of a riverside office in Embankment. The view shows that Mr Powell, a boy from the Black Country when he joined PwC's Brum office nearly 35 years ago, has done good: behind Mr Powell's left shoulder the London Eye revolves slowly, and, to his right, the Shard tower's record-breaking height is only emphasised by the dark clouds that envelop its upper floors.

Mr Powell has been UK chairman at big four accountant PwC for the past four years and is seeking re-election for a second term. At the time of writing, no rivals have emerged from the 873 partners who can challenge him and they have only until the end of the month to declare their candidacies.

This might well suggest that Mr Powell, a restructuring expert perhaps best known as the man who shut down MG Rover when he was the car manufacturer's administrator seven years ago, has so impressed colleagues that none dare risk the embarrassment of losing to him in a landslide.

After all, revenue has been up in each of the past four years and Mr Powell claims that 2011/12 fees will show "high single-digit" growth on the previous 12 months.

Just as likely, though, few would want to take on the problems PwC or any major accountant faces. These range from admitted and alleged failures in audits PwC undertook for JPMorgan and Barclays Capital to European and domestic investigations into the ways the "big four" – the others being KPMG, Deloitte and Ernst & Young – operate.

This month, the JPMorgan saga has weighed particularly heavily on Mr Powell's shoulders.

The Accountancy and Actuarial Discipline Board might sound like a suitably unexciting name for the industry's ruling body, but it wields enough power to have fined PwC a record £1.4m for potentially putting billions of dollars of JPMorgan's client money in danger. PwC failed to notice the cash had not been properly ringfenced, considered a huge risk in the post-Lehman Brothers world, and had already paid JPMorgan $12.5m (£8m) for its error two years ago.

Hefty though the fine may be historically, for some it does not suitably reflect the mistakes made. Tom Martin, the AADB's executive counsel, posed the question: "For a firm with £2.4bn, is this [fine] proportional?" That question might have been rhetorical, but Mr Powell chooses to answer it anyway: "There was no loss to anyone. When you get something wrong, you should stand up and admit it. Something that mitigated the fine was our reaction."

Mr Powell says that PwC, however, is "fighting robustly" an investigation by the AADB into possible misconduct amid allegations it also did not notice BarCap had failed to ringfence client funds between 2001 and 2009.

Although the Lehman collapse has been good for business – PwC has earned well over £400m in fees as administrator of the collapsed bank's London-based business – the cases demonstrate how auditors have become one of the main scapegoats for the crisis.

Michel Barnier, the European commissioner for the internal market, is particularly hell-bent on breaking up the dominance of the big four, believing their audit operations should be split from money-spinning corporate advisory work, such as M&A and restructuring.

Mr Powell admits internal work "analysing the implications" of how a separated PwC might look has started, but the West Bromwich Albion fan believes that Mr Barnier's ideas are impractical and doomed to failure.

"People join PwC because they want business expertise," says Mr Powell, who swapped from audit to restructuring mid-career. "They can work [in advisory] and return to audit as far better, more-rounded auditors. That attracts the very best talent. It's difficult to attract and retain the best auditors if firms can't offer that experience."

Besides, the Chinese walls at PwC are quite literal, at least for the most senior London-based staff. The firm separates many teams between its shiny new building south of the river in London Bridge and the Embankment offices north of the Thames.

The latter is undergoing a £100m renovation, so it can start to meet the standards of its Lord Foster-designed counterpart, which is so trendily low-carbon that it is powered on re-heated chip fat.

Mr Barnier also believes the only way to ensure mid-sized firms can crack the hegemony of the big four is for companies to have an auditor for a maximum of six years. They could not be reappointed for at least another four years.

Mr Powell argues this would only weaken audit quality. Accountants spend millions ensuring their systems meet the demands of multinational companies, meaning they need "some sort of certainty" through length of appointment to make that investment worthwhile.

Of more immediate concern is the Office of Fair Trading's decision to refer the audit market to the Competition Commission in October. The OFT found that 99 per cent of FTSE 100 audits in 2010 were conducted by the big four.

"Look at PwC's share in the FTSE 100, it doesn't seem to change," starts Mr Powell, seeming to undermine his argument from the outset. "That misses the point. The FTSE 100 changes [its membership] all the time. So just to maintain market share is ferociously competitive."

Most importantly, Mr Powell believes PwC's clients are content with the structure of the auditing market. He should know, given that he meets the chief executive, chairman or financial director of two customers every day for an hour at a time.

These are usually international companies, so Mr Powell has an insight into how big foreign investors are starting to look at the UK as a place to do business. "They're concerned about the criticisms from our politicians, especially when they use phrases like 'crony capitalism'. The UK needs to be attractive to business, but significant companies are not looking to invest here because of unpredictable regulation."

Virtually every word in that tub-thumping message sounds like it was spoken in a different part of the country, but the sentences are carefully considered and slowly emphasised. Mr Powell speaks like a man well down the campaign trail, an aura that he is the right person to lead in troubled times.

Focus on: Ian Powell

Age: 55


Family: Married with four children


Employment history: Joined PwC as a graduate trainee in 1977. Made partner in 1991, elected UK chairman in 2008


Family home: in Cheshire, where he spends weekends. Lives in London


Football club: West Brom


Favourite film: Three days of the Condor


Most recent theatre visit: War Horse

Start your day with The Independent, sign up for daily news emails
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'