Liza Robbins on Private Equity’s impact in audit firms
July 22, 2024
Liza Robbins, Chief Executive of Kreston Global, was recently featured in Treasury Today, commenting on the divided opinions regarding private equity ownership of audit firms. The debate centers on whether this trend represents a natural evolution of corporate financial oversight or a threat to its transparency. Click here to read the full article, or read the summary below.
Private equity’s growing interest in accounting firms
Private equity firms have recently invested in some of the world’s largest accounting firms. Notably, Hellman & Friedman and Valeas Capital Partners acquired a stake in Baker Tilly, and New Mountain Capital made a significant investment in Grant Thornton. Rumors suggest that many large US audit firms are exploring similar deals.
The interest from private equity firms is driven by the stable cash flows of accounting firms, even with mandatory auditor rotation. Smaller private companies often require external audits, providing a steady client base.
Challenges and implications
Allan Koltin, CEO of Koltin Consulting Group, assures that there are protections against cost-cutting pressures from private equity, noting that audit firms must maintain independence through alternative practice structures in the US and majority control by CPAs in the UK. Koltin believes audit quality has not declined and that private equity has not compromised audit processes.
Liza Robbins highlights the challenge for regulators to keep pace with the rapid changes in the profession. She warns that while digital transformation can reduce operational costs and help mid-sized firms handle larger audits, technology’s potential must be fully realised. Robbins also points out that consolidation could impact audit quality by limiting client choices and creating a more uniform audit methodology, which could lead to systemic errors and transparency issues.
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