THE FINAL FINDINGS from the Competition Commission’s investigation into the audit market are expected in the next couple of months.
Yet I wonder whether its conclusion, whatever that may be, will actually settle the dispute over whether the market for FTSE 350 audit work is competitive. What one set of firms views as competitive is entirely different from what the other sees as uncompetitive.
A recent working paper from the CC found that there was no evidence that the Big Four ‘tacitly’ collude to restrict competition. It appeared to back up their claim that the market for large-listed audits is ‘fiercely competitive’.
Indeed, a recent infographic published on behalf of PwC by its lawyers Norton Rose found there were more than 130 instances of FTSE 350 companies switching auditor between 2001 and 2011.
PwC said the evidence-based data, which represents a rate of about one switch a month, dispels the widely held view that the audit market is static and uncompetitive.
Fair enough, you might say. But show the exact same data to the mid-tier firms that want to get their own piece of the action, and you get an entirely different reading. The opposing argument is that, while the Big Four look terribly competitive when dealing with each other, it hardly constitutes competition if that business is just handed among the usual suspects.
The market waits in anticipation for the CC to deliver its decree. But it is unlikely that the side that loses out will feel satisfied with the results. Perhaps a fudge is most likely. At least that way the argument can rage on. It probably will anyway, whatever the outcome.
The Financial Reporting Council has launched an investigation into the conduct of the Big Four firm in relation to its audit of BHS
The FRC says it best when it says nothing at all
Audit competition will drive many changes, but increased audit quality is extremely questionable
BDO says £10bn worth of audit and non-audit services could swap hands between accountancy firms in the next ten years