Plan to break Big Four's audit grip
Smaller accountants hope mandatory rotation report will end 'anti-competitive closed shop'
Mark Leftly is political correspondent at The Independent on Sunday and associate business editor across the Independent titles. He writes a weekly column, Parliamentary Business, published on a Wednesday, that covers politics and the City. He is a multi-award winning reporter and was named Press Gazette's business magazine journalist of the year prior to joining The Independent on Sunday.
Sunday 17 February 2013
The Competition Commission is set to crack the dominance of the Big Four accountancy firms with proposals for sweeping market reform this week.
Former Slaughter & May lawyer Laura Carstensen has spent the past year probing the audit market, which sees more than 95 per cent of FTSE 350 company accounts looked after by either PricewaterhouseCoopers, Ernst & Young, KPMG or Deloitte. Mid-tier firms such as BDO and Grant Thornton have argued that this represents an anti-competitive closed shop that is ultimately costly for the companies that are audited.
It is believed that Ms Carstensen's inquiry team will advocate a form of "mandatory rotation", that would see firms automatically moved on from auditing a business's accounts after a set number of years. This will be widely criticised by the Big Four, as some academic studies have shown that this does little to help foster greater competition and forces audit committees to get rid of accountants that they think have done a good job.
A senior source at one of the Big Four said: "Our position has long been that mandatory rotation actually takes away decision making powers from audit committees, as it tells them to do something that they might not want to do. There is a risk that hiring someone else could be detrimental to the quality of audit."
However, as this is a provisional report, the proposals are expected to remain vague enough to consider such arguments. A source from an accountant that has been critical of the structure of the market said that mandatory rotation could also involve a recommendation that a non-Big Four firm is always part of the tender process.
Ms Carstensen's team would be pressed to consider such an idea as it would ensure that mandatory rotation didn't just mean that a company simply passed the audit role among the Big Four every few years. If that happened, market dominance would only be reinforced.
A spokesman for the commission declined to comment on the details of the findings, but did say that he hoped the interim report would be published this week. The commission has had an extremely busy month – for example, last week it provisionally recommended lifting outdated advertising price caps on the Yellow Pages – so there is a possibility the publication could slip to the end of the month.
Under the current timetable, the final report with definitive recommendations is due in August.
- 1 Windows 10: man updates PC, wakes up to find porn slideshow on repeat
- 2 The 'world's most beautiful vagina' has been debunked by science
- 3 John Green schools morning show hosts after awkward interview with Cara Delevingne
- 4 Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
- 5 Bulletproof armadillo puts Texas man in hospital after shot bounces off hard shell
Whoopi Goldberg tells Cara Delevingne to suck it up: 'She's not famous. I'M famous'
John Green schools morning show hosts after awkward interview with Cara Delevingne
Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
Bulletproof armadillo puts Texas man in hospital after shot bounces off hard shell
'Rowdy' Roddy Piper dies: Wrestling legend dies aged 61, according to reports
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...