SOMEWHERE VERY close to where you are now is someone who used to work for a “big-four” audit firm. There is a law of physics that says wherever there is a reader of broadsheet business pages there is at least one former big-four accountant within shouting distance.

The big-four firms are KPMG, Deloitte, Ernst Young and PricewaterhouseCoopers. In the UK alone, the ex-employees of these magic-circle firms on LinkedIn run to about 100,000. Those listing KPMG as a former employer amount to a monstrous 27,657, and the other three aren’t far behind.

That number is enough to do something big. Only accountants, as we know, aren’t predisposed to do something big; so they’ve been doing something small instead, in great number. These alumni have been shunting business in the way of their former employers. And this, according to the UK’s Competition Commission, is a stitch-up. Last week it published a report showing that two-thirds of all finance directors used to work for a big-four firm and that this was hampering competition.

It is always delightful when a regulator goes for the big boys. It is even more so when they start going for old boys and their networks. Only this time it isn’t. This time the regulator has got it wrong.

The sheer size of these networks is quite worrying – but only in terms of the pall it casts on cocktail parties. It would be nice occasionally to go to a business function and meet someone who used to work somewhere other than PwC.

But in terms of the market for accountancy services, the alumni networks are not a problem at all – in fact, they are a thoroughly good thing. Think about it. If you have worked somewhere, you know what it is like. You know exactly how hard people work, how straight they are, how often they screw up and, above all, whether they are charging a fair price for what they do.

Let us suppose you and I were discussing the reliability of news stories; I would be better placed to make a judgment than you, as I know how they are put together. The chances are that this knowledge would make my view harsher than yours, as companies tend to look worse from the inside. I can see the joins. You (I hope) cannot.

So an honest thumbs-up from a current employee means quite a lot. But one from a former one means even more. When you leave a company, it is human nature to pretend that the move was a success. That may mean bigging up the new place and littling down (to coin a useful new phrase) the old one.

If, in the case of the big four, the alumni are prepared to spend huge amounts of their current employer’s cash on their ex-employer’s services, that suggests that the market is working rather nicely.

Alumni carry a lot of useful information that it is stupid to ignore. A couple of years ago there was a fascinating study in the Harvard Business Review on the effects that such relationships have on investment.

The study examined the decisions made by mutual funds over a 15-year period, comparing the educational background of the investors to those of the senior executives in the companies in which they were investing. It found that the fund managers were disproportionately likely to invest in companies when they had gone to the same colleges as the target company’s chief executive. That, in itself, is maybe not so odd.

More interesting was the fact that these investments outperformed. Indeed, the effect was stronger the closer the two were. So if the investor and the chief executive were in the same class, the shares outperformed more than if they were, say, a decade apart.

The authors did not conclude that this was a case of insider trading or the evils of the old-boy network. Instead they deduced something more obvious – and more useful. If you were at school with someone, you are better able to judge them than if you weren’t.

The UK Competition Commission should read this study and have a rethink. What is needed is a different sort of study of alumni networks that would make their information available to everyone. It should not be limited to accountants, but cover management consultants, people in advertising, bankers – any line of business where people move to work for client companies.

League tables could be compiled showing the percentage of times that alumni gave business to their old employers. If the numbers turn out to be high, we should not lie awake at night fretting about nepotism. We should take it as a big vote of confidence, and consider hiring them ourselves.