But things will be different this year if the accounting firm BDO Stoy Hayward has its way. The RAC management want to sack Stoy as auditors, replacing the firm with Price Waterhouse. In a competitive tender, PW offered to do the audit for £160,000, a good £90,000 less than Stoy's pitch. RAC members are being urged to approve the change in auditors at the meeting this Wednesday.
Fair enough, you might think. But Stoy is fighting to keep its client, accusing PW of pricing its audit service as a "loss leader" in order to get its foot in the door at the RAC and sell the club other more costly advice on tax, computers and management.
PW - Stoy reckons - is no different from a supermarket that prices baked beans and other staples below cost and then clobbers you on the price of fresh fruit. In an unprecedented move, it has written to the RAC's 13,500 members setting out its arguments.
This is not an isolated dispute. Allegations of "low-balling", as the predatory pricing technique is called, are on the increase.
Usually it is the Big Six accounting firms that are accused of unfairly poaching business from middle-ranking firms - PW has earned the soubriquet "half-price Waterhouse" because of its aggressive pricing. The trend creates obvious worries. One is that the accountancy firm gets too dependent on the audit client to remain totally objective.
In theory, auditors are appointed and paid by the shareholders, but it certainly does not feel that way. Can a firm be as robust in its assessment of the accounts of a firm paying it a £100,000 audit fee when it gets £500,000 in non-audit work from the same management?
It's an important question. The value of an audit is questionable at the best of times. Most auditors fail to notice that anything is amiss until after the wheels have fallen off.
And their record is getting worse: the percentage of cases where auditors qualify the accounts of companies that subsequently go bust is declining.
Any arrangement that intensifies the already too cosy relationship between management and auditors is to be deplored. There is a strong case for banning accountants accepting any non-audit work from their audit clients.
The Big Six argue that they can save clients money by offering audit and non-audit work together, because their staff are already familiar with the business. This is twaddle. The bulk of audit work is done by unqualified 21-year-olds who know less about tax or IT or management consulting than the cat.
Back to the RAC, I suspect that after 16 years in the job Stoy got a bit complacent and was charging a fairly fat fee. After all, it was able to wipe £54,000 from its charges as soon as it was confronted by a competitive tender. But that does not explain the still huge gap between its bid and the offers of PW and other firms that tendered.
The truth is that the RAC is a juicy worm for accountants. It is not just a couple of gentlemen's clubs. It also owns the commercial motoring organisation, which sells a string of services from car rescue to insurance. Last year, it earned after-tax profits of £7.6m on sales of £253m.
It may be just my mischievous mind, but there may be a further reason why PW is so eager. The RAC is one of those curious organisations whose members, though the legal owners, cannot get at the value their ownership confers. We have already seen how building society members are pressing to unlock that value. How long before some RAC members demand something similar for their club? By my back-of-the-envelope calculations they could each receive about £10,000 if the club was sold or floated. Meanwhile, there would be fees galore for the advisers.
RAC members should treat the PW proposal with caution. In my view, the fact that the club's finance director used to work for PW is enough to make it wiser for the club to look elsewhere for an auditor, if only to be seen to be above all criticism. If the RAC must take on PW, then it should insist the firm is not hired for any non-audit work. Unfortunately, on Wednesday I bet they will be more concerned about the billiard room and the windsor soup.
Swiss lesson for Warburg NEVER say never, but nothing now looks likely to stop Swiss Bank Corporation taking over SG Warburg's investment banking activities. The deal requires the approval of Warburg's shareholders and the Bank of England, but neither looks likely to baulk at the offer. A counter-bid is possible, but unlikely.
Warburg will enter the SBC maw, and as we report on page 1, that will mean adopting the aggressive style of SBC. In just a few years, SBC's contentious deals have managed to put noses out of joint all over the Square Mile - not least at Warburg.
Warburg itself was once the unloved outsider, founded by the Jewist refugee Siggy Warburg. But it long ago conformed and is now at the very heart of the City establishment.
It will be fascinating to see how the two cultures blend. SBC has shown it can successfully absorb alien organisations. But it will need every ounce of its renowned Swiss diplomacy to keep everyone at Finsbury Avenue happy. Bonuses or no bonuses.
Tadpole too hot to handle I SHUDDER to think how many small investors have burnt their fingers in Tadpole Technology, the whizzbang maker of portable computers.
It is one of those wonder stocks that attracts far more interest than its piddly size justifies. Some weeks it is the most popularly traded share on the stock market, as measured by individual transactions.
The company's own broker, Albert E Sharp, bears much of the blame for stimulating demand for the shares, recently opining that investors would not see "a more opportune moment" to buy. The rest is history.
The moral is plain: stop your ears when the house broker comes a-knocking with a red hot tip.Reuse content