Partners at the UK arm of Deloitte are in line for their biggest payday in a decade amid widespread criticism of Britain’s big accounting firms and their substandard audit work.
The average payout for equity partners at the big-four firm for the year to 31 May is £882,000 – up from £832,000 a year ago. Some of the 699 partners will be paid less while others will make substantially more.
Deloitte is the first of the big four UK accountants to report its 2019 results. The firm’s revenue, which includes Switzerland, rose 10.9% to £3.97bn and its distributable profit rose to £617m from £584m.
Britain’s big accountants have been criticised by politicians and regulators over lax auditing of companies, anticompetitive practices and conflicts of interest. Scrutiny of the firms increased after a string of corporate collapses including Carillion and BHS.
The Competition and Markets Authority stopped short of breaking up the big four in April but its report called for greater distance between audit work and consulting. In a withering review of the overall audit market, the Financial Reporting Council (FRC) found the quality of Deloitte’s audits declined in 2017-18, although the firm performed better than some others.
Deloitte and its big-four rivals PricewaterhouseCoopers, KPMG and Ernst & Young dominate the market for auditing Britain’s largest companies and have used those relationships to sell more profitable services. Deloitte’s audit and assurance revenue was £582m last year compared with £952m for consulting and £862m for tax and legal services.
The firm said it had made investments in its audit practice that would not have been possible without revenues from its other businesses. Deloitte said 84% of its FRC-inspected audits were acceptable last year compared with 76% in 2017/18 – although that was still below the regulator’s target of 90%.
Stephen Griggs, Deloitte’s managing partner for audit and assurance, said: “We have been consistent in our support for change in the audit market and are positive about many of the proposals that have been put forward …
“However, we do not agree with proposals that would see any form of separation of the audit business from the rest of the firm. Audit quality is considerably enhanced by the investment capacity and access to specialists that being part of a much larger and diverse multidisciplinary firm allows.”
Deloitte said its distributable profit increase was caused by one-off gains, including the sale of an investment, and currency swings. Without these items, profit would have been unchanged, it said.