Accountancy Age, Accountancy Age, Thursday 17 June 2010 at 00:30:00

The dire situation at Vantis is not the result of of an accountancy firmbeing structured as a plc? Banks' insistence on Big Four auditors exposed


Events took a dramatic turn for the worse for Vantis this week. That therewere troubles inside the firm was already widely known. A going concernstatement and well-publicised problems with struggling to take fees out of theadministration of Stanford International had sent clear signals that things werenot as they should be.

But things have become worse. On Monday, trading in Vantis? shares wassuspended and its chief executive, plus another director resigned. Its financedirector has taken over leadership while the search is underway to find a newCEO. Is this as a result of an accountancy firm being structured as a plc?

We think not. The company?s travails are about judgment in the kind of workit offers rather than inherent problems in being a plc. The headline decisionbeing to take on the liquidation of Stanford after its eponymous owner wascharged with running a vast Ponzi scheme. From the outset there was surprisethat Vantis got the job and many observers believed that it would beproblematic. The crucial factor was the very cost of undertaking the work whilewaiting to be paid when the assets were realised ? if they could be realised. Sofar, Vantis has failed to bring in the money. But it doesn?t matter whether youare in a plc or a partnership, the risk assessment and judgment remains thesame.

With shares down to 10p when they were suspended, Vantis now looks like aprime target for takeover. Accountancy Age has written this before, but recentevents makes Vantis an even clearer target. The question is will anyone want thewhole company? More likely, they will want parts of Vantis and will look tocherry pick the parts that look profitable.

If that is the outcome it will be a dismal end to what was a bright prospectwhen it first launched.

Covenants break cover

One of the most controversial issues in the long-running debate about the BigFour?s dominance of large company audit is that banks insist on one of thequartet as auditor when they put together banking covenants.

For all the insistence that this happens, and for all the lobbying on theissue, there is precious evidence out in the open that this happens.

Until now. We reveal this week that the Big Four have acknowledged thishappens and that it restricts competition in the audit market. Such an admissionmeans regulators and practitioners can stop talking about myths and focus onreality. It?s now time the banks themselves came clean so that the watchdogs canput together a true picture of what happens when they talk to clients. This mayat last be a first proper step towards reshaping the audit market.