Grant Thornton, mid-tier auditor to thousands of small businesses, clearly believes — as the writer Somerset Maugham did — that tradition is a guide and not a jailer.

This year it is breaking with custom of the past 15 years of publishing full annual accounts before Christmas. GT has changed its year end from June to December.

It is about aligning the group’s year end with its international network, says GT. It fits, too, with newish chief executive Dave Dunckley’s plan to restructure the business along operational rather than geographical lines in the new year, said Fiona Baldwin, GT’s head of audit. 

Still, eyebrows would rise if one of GT’s larger audit clients delayed issuing financial statements for six months. They did when Sports Direct postponed publishing its annual accounts because its then-auditor — GT — would not sign them off. Extending the year end is fairly common among small unquoted companies. It is infrequent among high-profile and larger publicly-quoted companies. Shareholders fret that playing with a year-end is a sign of a business hoping to mask a bad year and fudge comparisons with a good one. 

That said, GT is owned by partners not shareholders. And it has issued a truncated “transparency report” on the 12 months to June 2019. Still, it has had a bad year.

Profit per partner fell to £323,000 from about £343,000 last year, it said last week. That is close to half the amount enjoyed by close rivals at BDO. Partner pay at Big Four firm KPMG was £601,000. PwC’s profit per partner topped £765,000.

It has been a difficult year for most auditors, under scrutiny over a string of corporate failures. But GT is faring worse than most. The Financial Reporting Council is probing its audits of the accounts of Sports Direct, café chain Patisserie Valerie and Interserve, the outsourcer. GT is also appealing a High Court order this year to pay its former audit client Assetco, a fire engine leasing service, damages in excess of £21m for negligence. 

In July, the FRC published an end-of-year report that would make most schoolchildren squirm. Just over a quarter of GT audits it reviewed needed significant improvements, said the FRC. “This percentage is markedly higher than any other firm we have inspected over the period. This level of audit quality is unacceptable . . . indeed the overall lack of improvement in quality over the past five years, is a matter of deep concern”.

The FRC also remarked on the number of higher-risk audit clients taken on and questioned whether GT had the capacity and capabilities to audit them “to an appropriate standard”.

That month GT said it would quit as auditor to Sports Direct

Ms Baldwin points out that the FRC’s report refers to work done in 2017.

Meanwhile, though, GT slips further down the league tables, according to the FRC’s market snapshot out last week. It has more than 8,500 audit clients but only 130 are listed companies. By July, GT had no FTSE 100 company clients and only four FTSE 250 clients. Since then, it has quit Sports Direct and Woodford Patient Capital Trust has been relegated; only Witan Investment Trust and JD Wetherspoon remain. 

Early in 2018, GT conspicuously withdrew from tendering for FTSE 350 audits because it said it could not compete against the Big Four. But it has also forfeited to BDO its place as Aim’s leading auditor. BDO has 126 Aim audit clients against GT’s 104. Aim insiders say GT may not be losing audit clients, but it is not winning them either.

Mr Dunckley has promised to shake the business out. In June, the firm outlined plans to “strengthen audit as a specialism” and ready it to compete for “higher-quality FTSE 350 work”. Eventually.

It also has high hopes for expected legislation designed to break the market stranglehold of the Big Four. Most significant will be the competition regulator’s plans to force joint auditors on companies, one from outside the Big Four, and drive a wedge between often chummy relations between boards and Big Four number crunchers.

However, last week the FRC painted a wintry picture in which the Big Four’s hold tightened. Their fee income rose while smaller firms’ fees fell. Meanwhile, beancounting was conspicuously absent from the Queens Speech last month, kicking reform further down the road. And until legislation is brought in, GT can tinker with audit customs but cannot truly break free of tradition.

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