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Disillusionment with conflicts of interest led Simon Collins to return to accountancy from investment banking. In a novel move, the former NatWest and SG Warburg financier joined the UK arm of KPMG in 1998 to set up a debt advisory practice.
The return to the profession, where he had trained with PwC, has turned out to be a happy one.
Earlier this month, Mr Collins started work as KPMG’s UK chairman and senior partner, succeeding John Griffith-Jones, chosen as the first non-executive chairman of the UK’s new investor protection and markets regulator.
Mr Collins’ background is unusual among the men who lead the UK arms of the Big Four accounting firms: PwC, Deloitte, KPMG and Ernst & Young.
He says the move away from investment banking reflected his dissatisfaction with the dual role that banks played in dispensing advice to companies while also getting paid to provide or arrange funding.
KPMG could be a more independent counsellor, he reasoned: “I was very keen to get back to the values of the [accounting] profession but wanted to bring capital market insight.”
He adds: “The investment banking models were being built increasingly on packaging services and money.”
Mr Collins took a fairly downbeat view of the credit boom as it approached its apex, warning in a 2005 article that irrational lending had created a bubble that was “highly likely to burst with some potentially dire consequences for borrowers”.
He does not view his rise to the top of KPMG as sign that the credit crisis has made the organisation more focused on debt. Rather, he thinks accountants are keener on diversity of experience when selecting leaders.
However, his job involves defending the firm against conflict of interest claims that prompted him to flee investment banking.
Critics argue that audits are undermined as leading accountancy firms have consulting arms that compete for extra business, sometimes from the groups they are auditing.
The European Commission wants to force some firms to break up into separate auditing and advisory arms to counter this perceived conflict.
Mr Collins, like the rest of the Big Four, is opposed to such a move: “We will not improve audit quality by an artificial separation of services.”
He denies that bank auditors were too cosy with their clients: “There’s a lot of challenges that go into the average audit never mind the large complex financial institutions.”
KPMG audits HSBC, which has been hammered in the US over inadequate money-laundering controls. It also audits Standard Chartered, which has been accused by a US regulator of hiding its dealings with Iranian financial
Do these episodes reveal weaknesses in KPMG’s work? Like other auditors, Mr Collins won’t talk about specific clients.
He says the probing of internal controls at banks by auditors is focused on the preparation of historic financial statements rather than oversight of corporate behaviour.
He also alludes to the “expectation gap” – the profession’s often-made complaint that outsiders misunderstand what an audit does and does not do.
backlash against aggressive tax avoidance is another subject for the likes of KPMG, which has an arm advising businesses on tax matters.
Mr Collins defends the right to mitigate tax liabilities but says some taxpayers have been taking things too far.
Tax advisers need their own moral compass, he says. But what does that mean in practice?
“A test I often use is: would my kids be proud of me?” he suggests.