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Mazars accountancy firm to finance spin-off from Audit Commission

Employee-owned mutual DA Partnership resolves question of financing for the new enterprise

An audit firm to be spun out of the Audit Commission is being financed by Mazars, Britain’s 12th-largest accountancy firm.

Last year the government announced that it was abolishing the commission. Its work auditing councils and other public bodies is being outsourced, with a new mutual formed by former commission staff bidding alongside private sector firms for the £90m worth of contracts.

Gareth Davies, the former head of the commission’s audit practice, is leading the new mutual, which will be called DA Partnership. Davies is on leave from his role at the commission in order to spearhead the bid.

Mazars will remain separate from DA Partnership, but will take a minority stake. Former public servants who join the new mutual from the commission will own the majority of the new enterprise.

“For an employee-owned mutual, it is crucial we have a strategic partner to make [our bid] possible,” Davies said.

A portion of the new firm’s profits will be directed to a charitable foundation that will run research into audit issues. The announcement of the firm’s financing resolves one of the major question marks hanging over the new mutual.

Davies suggested that should the joint venture prove successful, the pair could consider growing internationally. “Maybe we can work together beyond the UK, provided we have a strong launchpad through this process,” Davies said.

The commission outlined the process behind the outsourcing earlier this month. No firm will be able to win more than £45m worth of the £90m worth of contracts on offer, which means hopes that the process could be used to challenge the dominance of the Big Four have been dashed.

The Financial Reporting Council, the accountancy regulator, at one stage suggested that the commission’s work should be handed to a firm such as Grant Thornton to give it more scale to take on the big firms. European regulators are understood to be pursuing a separate plan to take on the large auditors.

Mazars does not currently carry out any of the council audit work undertaken by private sector auditors. Around 30% of the commission’s work is already outsourced – to PricewaterhouseCoopers, Deloitte, KPMG, Grant Thornton and to PKF.

David Herbinet, Mazars’ head of public interest, said the firm did do other public sector work.

“DA Partnership is an exciting venture that would retain a critical mass of public audit expertise for the benefit of public bodies and taxpayers. We are excited that they have chosen to work with Mazars,” he said.

DA, which stands for District Audit in an echo of the Audit Commission’s 19th-century antecedents, said it had been talking to potential partners since shortly after the announcement that the cmmission was to be abolished.

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