A slap in the face for the bean counters who wanted to be merchant bankers.

Ten years ago this month the big accountancy firms set up the accountants corporate finance network. It was a move which underlined the confidence which all the multinational partnerships felt at the time. They were giving a clear signal to the finance directors of top companies that, apart from actually providing funds, the firms had the wit and the wherewithal to compete with the merchant banks and corporate financiers of the Square Mile. It was also a message to the City that accountants no longer wanted to be regarded as the boring bean counters doing the due diligence while the flashy deal-makers had all the fun and made most of the money.

A couple of weeks after the fancy City launch, the accountants’ corporate network became one of the more minor victims of the stockmarket. Since that day no public trace of it has ever been seen. Ten years on, the network can be seen as a conflicting symbol of the hopes, fears and aspirations of the big, now global professional services firms. Only now are the accountancy boys really seriously tweaking the tails of the more established City merchant bankers.

But while they may have not made the breakthrough in the loftier end of the City, over the last 10 years they had proved themselves remarkably adept at cross-selling many other services to finance directors and virtually every other member of the board. A decade ago, even the largest partnerships earned the vast majority of money from audit, taxation and – in the bad times – insolvency.

The mix has now changed. Management consultancy has come to the fore, providing solid, relatively low-risk profits with a dash of commercial glamour. But at the same time as embracing their burgeoning management consultancy practices, especially with the great emphasis on IT, the modern accountancy firms, founded on the attest function of the audit, have been desperately ambivalent towards their roots. In many ways, they have become increasingly embarrassed by and with their audit practices – embarrassed enough to now hide audit behind the term “business assurance”.

The corporate finance network was an early sign of that discomfort. Not that you could tell about this uncertainty by the market shares comparison.

In many ways the relatively unchanged figures on the audit share of the FTSE-100 companies in 1987 and 1997 hide the turbulence of the past few years.

Some of the trends are well known. For instance, it comes as no surprise to read the consolidation that has happened. FTSE-100 companies are now the exclusive prerogative of a smaller number of mega-firms. Publicly most finance directors of multinational firms explain with regret that the decision to ditch the smaller firms has been forced on them by the need for their auditor’s international office network to reflect their own far-flung empires. But there are other reasons why boards have switched to the big boys of the accountancy world. The market capitalisation of the smaller FTSE-100 company now hovers around the #1.5bn mark. Some companies – such as Maxwell, Polly Peck and British & Commonwealth – which have disappeared from the FTSE-100 list over the past 10 years are a rude reminder to directors, shareholders and auditors of what can go wrong. When a company fails a writ for the auditor can never be far behind.

Auditors are described as having deep pockets, but some pockets are deeper than others. As one FD put it recently: “The average medium-sized firm has professional indemnity cover which is well south of #100m.” In other words, no use having the professional advisers to blame if they – or more accurately, their insurers – cannot be forced to pay for their alleged mistakes. But even if the Big Six have deep pockets they are not inexhaustible.

Back in 1987 it would have been unimaginable for one of these professional practices to go bust. But with the liability crisis which has engulfed the firms, commentators have in the past predicted that one of them will fail. This is not wild guessing.

While the partners have sometimes been accused of crying wolf over the extent of the unfairness of the joint and several liability laws, they too swear they are convinced one of their number could go under.

While the firms can blame the unfairness of the law, they have in many ways been authors of their own misfortune. The language and culture of the firms is now very different from the prevailing atmosphere of the middle-and late-1980s. It seems incredible to realise that until the mid-1980s that professional firms were forbidden under their professional bodies ethical code from advertising. Only when firms started circumventing the rules by using supposed job ads as corporate offerings was it decided the tide of marketing and PR could not be resisted for ever. The acceptance of advertising signalled a more competitive, less gentlemanly era. Although the firms have fought each other tooth and nail to secure their position in the market place – rather like armies in a war of attrition – the result has achieved nothing for the firms, apart from the satisfaction that they have probably given clients great value for money.

If years ago firms going bust was an unlikely scenario then so was the firms giving up on clients.

The fight for market share meant ropey FDs with ropey accounting policies could secure the services of a well-known name on the audit report, which was one route to assuring investors that everything was OK. We are beginning to see the first signs that the “take any job at any price” attitude of the last few years is changing, as firms are actually resigning from audits after undertaking a risk assessment and concluding that some of the fees just aren’t worth it. Whether such resignations become common place remains to be seen. But it is one indication of a shifting relationship between auditors and FDs.

Peter Williams is a freelance journalist.