Merger activity likely in mid-tier

ACCA technical director Roger Adams said: ‘The pressure for rotation could mean long established audits come under scrutiny – big companies could look at the mid-tier firms.’

Adams said some firms could combine to cope with larger-scale audits for international companies.

But he believed the remaining Big Four could not be forced to ditch existing audit clients. ‘The only realistic approach would be a twin track approach,’ he said. ‘The mid-tier firms should be encouraged to grow, and the financial markets could begin to say bigger is not necessarily better.’

Mid-tier firms support the call for action but warn changes will not happen over night. ‘The networks of mid-tier firms have the capacity to handle a significant number of international companies,’ said Baker Tilly national managing partner Laurence Longe.

Longe said the firms could grow either organically or by merger but said: ‘We can build up but can’t hire more people on the off chance of more business.’ Michael Cleary, national managing partner for Grant Thornton believed the firms were not in the position to audit FTSE 100 companies but said they competed effectively in the smaller quoted company sector.

‘Increasingly they will come to be serviced by the more credible members of the mid-tier,’ he said.