Exclusive: BDO’s managing partner on audit reforms, staffing issues and the company Christmas party
This week accounting giant BDO saw its profits jump to over three quarters of a million pounds per partner, putting them ahead of their peers at rival firms EY and KPMG.
At £760,000 per BDO partner, the firm leads the payout battle as EY partners were paid an average of £749,000 this year and KPMG partners received an average of £572,000 in 2020.
Moreover, the firm has stark views on proposed audit reforms in the UK, which have been touted as the biggest overhaul to British audits and corporate governance in generations.
Earlier this year it was reported that the reforms could include directors facing fines, suspensions or even having to return their bonuses in the event of a company collapse or serious director failings.
The reforms come in the wake of a series of high-profile corporate scandals and collapses including retailer BHS and Carillion.
To find out where the firm stands on these plans, Morning Wire sat down with managing partner Paul Eagland.
Having joined BDO in 1988, he became a partner in 1996 and in October 2020, Eagland was re-elected in his role as managing director to serve a second four-year term, having been at the helm since 2016.
In this exclusive interview with Farah Ghouri, Eagland discusses the firm’s plans for 2022, audit reforms and the office Christmas party.
What do you make of the proposed reforms to audits in the UK?
Overall we’ve completely supported the proposals, but all of our focus is on which elements of those reforms we truly believe will enhance audit quality. There are two aspects of the reforms, one on competition and the other on quality. Our major focus is on the quality side because global capital is becoming ever more discerning.
Post-Brexit, the UK will want to do all that it can to attract that global capital.
Paul Eagland
One of the things global capital will look at is quality standards being worked to, and the UK worked to some of the highest quality standards. So as the UK goes out to attract this money, we have to ensure that those organisations understand what our audit reform is going to result in. It’s really important that the government, the regulator and the profession get this right for this country.
BDO has been bolstering its audit arm this year, what are your next plans for the division?
We do plan to expand audit further. There is a huge market opportunity for us in audit, but as we do grow, we’re determined to focus on responsible growth so we balance the demand for our services with the number and quality, and capability, of our people.
We increased numbers of people already and we’ll increase by another 300 or so in the next 12 months. And that’s not just to have more capacity to do more work. It’s also designed to take the strain off people doing too much work. Because of that additional recruitment, people are working less hours this year by about eight per cent than they were last year.
So yes, we are recruiting more people but equally, as the market continues to demand services, we’re controlling the amount of work we take on. We do that by ensuring that we only take on work where we’ve actually got the people to do it. In the last two months we declined to pitch on £20m worth of work.
Where do you see opportunities for growth?
We see huge opportunities in the ongoing expansion of audit into mid-market. Often those are private or private equity backed. Private equity is going to make a big difference in the UK because they have the capital to help our best companies transform. So private Equity is a massive opportunity for us and those businesses don’t just buy audit, they also buy tax and advisory services.
Is BDO going ahead with Christmas office parties, in light of the new variant concerns?
We are not having any large events. Instead, we’ve asked people to keep any office events to a sensible number – of roughly 50.
Next week we’ve got our partners conference. We had a hotel booked and if we had gone ahead with it, we would have had 500 people turn up but we’ve deferred that until next year. Instead we’ll have smaller partner teams, of 25-50 people, in different areas and different offices but at the same time. So it will be partially virtual and partially in person.
Finally, let’s look ahead. What are BDO’s priorities for 2022?
There are three fundamental areas: Our people – their wellbeing, ongoing investment in their careers and hybrid working- so that when people can come into the office, they actually want to come into the office.
The second area is ways of working; next year for example we will spend more on IT than on property for the first time. Our investment is in IT so that people can work agile. The third element is quality, but that’s not just audit quality. It’s in everything we do.