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 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...