KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers hit back as probe attacks audit ‘closed club’
The Competition Commission has found that the audit market has “systemic” issues that have led to a closed club of the Big Four accountants dominating the sector.
Senior figures at KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers have reacted angrily to the findings of Laura Carstensen, the commission’s inquiry chairman, that the market is suffering from a lack of competition. Between them, the Big Four run the numbers of more than 95% of the FTSE 350, a market worth almost £800 million in fees.
After 16 months of investigation, Carstensen’s provisional report says corporates should be compelled to re-tender audit work more regularly. They could also be forced to change their auditor every seven, 10 or 14 years, depending on further findings during consultation, and prohibit loan terms that specifically say a Big Four auditor must be used on the accounts.
Carstensen told the Evening Standard: “This is systemic. There’s a stickiness in the market — the fact is that companies stick with an audit firm for decades, which can potentially lead to quality issues. There would be price benefits from switching around.”
The commission also wants audit committees and shareholders to have more of a say than management over who runs the rule over company accounts and the fees that they are paid. “Management interests might diverge from shareholders — they would want to present things in a favourable light while shareholders might want warts-and-all accounts,” she added.
Richard Sexton, PwC’s head of reputation and public policy, dismissed this argument, saying: “We believe that the Competition Commission has grossly underestimated the critical role that audit committees play in protecting the interests of shareholders.”
Ernst & Young denied the audit market was failing to serve shareholders, saying it believed “competition between audit firms is healthy and robust, and that the evidence supports this”.
Mid-tier accountants have long called for reform, with BDO, Grant Thornton and Mazars among the most vocal. BDO senior audit partner James Roberts said: “Although these findings are game-changing, I don’t see a landslide of work coming our way soon.”
However, Roberts believes the reforms could mean the Big Four’s hold of the FTSE 350 market will slide to as low as 80% within five years. The commission’s final report is due in August.
- 1 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
- 5 We have six months to save the world, says leading economist
California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
Sepp Blatter resigns: FBI are investigating outgoing Fifa president, claims report
Alton Towers crash: Four seriously injured and 16 guests trapped as Smiler ride carriages collide
Gay teenager 'forced to have sex with his own mother' to 'cure' his homosexuality, campaigners in India say
Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...