Lords to probe audit market

House of Lords

The audit market is to come under the scrutiny of the House of Lords which will look at the domination of the Big Four and whether auditors should have done more ahead of the banking crisis.

Lord MacGregor, chairman of the Lords economic affairs committee, said: "The auditing industry has been dominated by a very small number of players for some time now. We will look at the scope for promoting more competition."

The competition issue is already on the agenda of the Financial Reporting Council and has been examined by the House of Commons Treasury committee.

A recent report from the FRC and FSA criticised the role of auditors during the crisis saying they had failed to tackle management bias.

The Lords investigation will look at basic questions such as wether Big Four dominance increases the price of audit and whether the market needs to be opened up.

But it will also examine much more sensitive issues about the audit of banks and whether the auditors were sufficiently sceptical in the run up to the crisis, and could they have done anything to mitigate the crisis.

The Lords are inviting responses to the probe by 24 September.

Read more:

New FSA powers will force auditors to speak out

Treasury committee accuses auditors of "tunnel vision"