The finance bosses of the country’s biggest firms have claimed that they “don’t understand” the Competition Commission’s hard-hitting proposals to reform the audit market, which is dominated by just four accountants.
The regulator is demanding that listed firms ask accountants to pitch for the job of checking over their numbers every five years, in a move designed to foster greater competition.
At present, more than 90 per cent of FTSE 350 firms are audited by one of only KPMG, PricewaterhouseCoopers, Deloitte and EY, in what smaller accountants argue is a closed club that proves costly to shareholders. In some cases, the same Big Four firm has audited the accounts of a company for more than a century.
However, the 100 Group of finance directors from the FTSE 100 blue chip index, has bashed mandatory tendering. In a letter to the long-running inquiry which is finally expected to close next month, Pearson finance director and 100 Group chairman Robin Freestone said: “We cannot understand why… the decision has been reached mandating companies to tender their audits every five years.”
He added that “every other tender will be academic”. Separately, there have been arguments that because tender processes are so time-consuming and costly, running them every five years would simply mean the incumbent is virtually guaranteed to win.
In another submission, BT Group director Glyn Parry argued: “In our view there is a risk that tendering would become less thorough, less meaningful and may result in deterioration in audit quality standards.”
Standard Chartered revealed last week that they were running a tender process, despite having used KPMG’s services since the 1970s
KPMG is wary of losing a big name bank client having just been replaced by PwC at HSBC, the country’s most lucrative account.