Race to the Bottom: The Case of the Accountancy Firms” (ISBN 1-902384-08-3) written by Jim Cousins MP, Austin Mitchell MP and Professor Prem Sikka (University of Essex) provides authoritative evidence of some of the anti-social activities of major accountancy firms.


Major accountancy firms are at the heart of the global race-to-the-bottom that shows little concern for the rights of stakeholders, openness and public accountability. In pursuit of profits, major firms ignore rules on auditor independence and market aggressive tax avoidance schemes, shifting the tax burden from companies to individuals.

Major accountancy firms are engaged in the downhill race for auditor liability. The state guaranteed monopoly of external auditing was given to accountancy firms on the condition of ‘joint and several’ liability, creating incentives for partners to police each other and accept consequences of poor work. Steadily, this has been diluted. Now firms can limit their liability by trading as limited liability companies or as Limited Liability Partnerships (LLPs). They don’t owe a ‘duty of care’ to any individual affected by audit failures. Accountancy firm partners share the profits, but don’t have to suffer the consequences of negligence by their firm or fellow partners.

Not content with lobbying and financing political parties to get their way, accountancy firms have hired entire governments to advance their interests. Price Waterhouse (now part of PricewaterhouseCoopers) and Ernst & Young hired the legislature of Jersey to enact a LLP Bill, which they themselves had drafted. They awarded themselves protection from lawsuits, with little public accountability. They demanded the same from the UK government with the threat that if it did not oblige they would cause economic and social turmoil. The UK government gave way. Now they are threatening to cause chaos in the banking and insurance industries unless they get even more liability concessions. Major firms are demanding a ‘cap’ on their liabilities and ‘full proportional liability’, both already ruled out by the Law Commission. Lax auditor liability laws dilute incentives for delivering good audits and played a major role in recent US accounting scandals that have resulted in loss of investments, jobs, pensions, homes and savings. Neither the US nor the EU is willing to give any further liability concessions to major auditing firms, but the government is keen to oblige without any quid pro quo.

The anti-consumer laws demanded by the Big Four accountancy firms would make it impossible for injured stakeholders to secure appropriate redress from negligent auditors. They would remove incentives for delivering good audits; encourage reckless auditor behaviour and even more audit failures and scandals. Anything given to accountancy firms would be demanded by producers of other goods and services. The only sure losers in the race-to-the-bottom are ordinary people. <> 

The monograph urges the government to clip the wings of the Big Four accountancy firms by investigating their role in tax avoidance and flight of capital, appointment of independent regulators, banning the sale of non-auditing services to audit clients, breaking-up the Big Four firms and inviting news players to enter the auditing market. People are urged to generate pressures for change by boycotting the services of major accountancy firms engaged in the race-to-the-bottom.