‘Medieval’ Big Four struggle to account for their Luanda Leaks involvement
30 Jan 2020

It was barely a year ago that PwC sent its accountants off for compulsory, face-to-face “scepticism lessons” as part of a multi-million pound plan aimed at rebuilding trust in the disgraced accounting sector.

Following a string of doomed audits and rising concerns that accountants kept missing red flags in businesses on the brink, the ‘Big Four’ bean counter was teaching staff to “think sceptically” and challenge FTSE bosses before rubber-stamping their accounts.

It was not the only UK audit giant sending its accountants back to school. While PwC taught staff how to be more critical, KPMG staff were last year shown how to have “challenging conversations” through role play exercises, and EY tested staff productivity using psychologist Abraham Maslow’s hierarchy of needs.

But still the scandals roll on. Last week, a top PwC executive quit following revelations of the firm’s links with Africa’s richest woman Isabel dos Santos, who is under investigation for corruption.

The daughter of Angola’s former president José Eduardo dos Santos faces allegations of exploiting family connections to secure deals on land, oil and diamonds after more than 700,000 leaked documents dubbed the “Luanda Leaks” implicated her in murky deals. She denies the allegations and claims they are part of a political witch-hunt.

An internal probe at PwC will now decipher whether anyone at the London-headquartered business should lose their jobs or have their bonuses chopped over the saga. It allegedly pocketed millions in fees advising companies linked to Dos Santos or her husband.

“We need to move with speed to take action to regain confidence,” PwC’s chairman Bob Moritz told The Guardian last week, adding that he was “shocked and disappointed” by the Luanda Leaks disclosures.

Too much credulity

However critics of PwC argue that job and bonus cuts do not go far enough to deter future bad behaviour inside the group or within Britain’s scandal-hit audit sector.

“This scandal … indicates deep organisational malaise that can’t be cured by just firing a few people,” says Prem Sikka, an accounting expert at the University of Sheffield.

“I’m sceptical that these firms can change their culture. They’ll make some ritual sacrifice and say a bit of mumbo jumbo about ethics, but what is needed is regulatory action – not just fines but a complete ban on winning any new clients.”

The Luanda Leaks have put PwC under intense scrutiny just over two years after its rival KPMG was embroiled in a high-profile corruption scandal in South Africa.

Its past links to companies run by the controversial billionaire Gupta family meant KPMG was kicked off public sector contracts in the country and was forced to overhaul its management team in South Africa.

“If you think about what happened at KPMG and what you’re talking about here, their [Big Four’s] approach is somewhat medieval – say a bit of mumbo jumbo and make a sacrifice and ‘all will be well’,” Mr Sikka says.

Rachel Davies, head of advocacy at Transparency International UK, agrees that more needs to be done to stop this type of behaviour and warns that taking on the wrong client risks the reputation of other UK businesses.

“Real progress has been made in recent years to strengthen the UK’s defences against dirty money but much more work needs to be done. Currently, UK law enforcement face difficulties holding large firms to account,” she says.

By Lucy Burton, The Telegraph, 29 January 2020

Read more at The Telegraph

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