Leading article: Scrutiny of the 'big four' is long overdue

 

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Imagine what your accountant would say if you said you'd been with the same supplier for donkey's years, you never shopped around and if you did, you would look only at three other firms – despite many others to choose from.

That, pretty much, is where we are with the auditors, where four firms – PwC, KPMG, Deloitte and Ernst & Young – have a stranglehold over the lucrative business of auditing the UK's largest companies. So total is their grip that only one member of the FTSE100 ranking has its books checked by a firm outside the "big four". Which is why the decision by the Office of Fair Trading to refer the profession to the Competition Commission is so welcome. It simply cannot be healthy commercial practice that a small number of firms enjoy such domination. Also ripe for inquiry is the startling fact that between 2002 and 2010 a mere 2.3 per cent of FTSE100 companies changed their auditor (presumably all those golf days and hospitality tickets represented money well spent). Ernst & Young said yesterday that it believed competition for audit work was "alive and well" – but how the accountants maintained a straight face as they peddled this line in the face of the 2.3 per cent figure is hard to fathom. But why stop at accountants? In law, the "magic circle" of Allen & Overy, Clifford Chance, Freshfields, Linklaters, and Slaughter and May occupy a similar lofty position. Big four, magic circle – the monikers speak volumes and invite long overdue scrutiny.

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