Competition Commission must roll back on audit rules
Competition Commission must heed the view of business and adopt FRC approach to audit tendering rules
THE COMPETITION COMMISSION has been left with much to ponder after receiving formal responses to its proposals to shake up the large-listed audit market.
Industry heavyweights ranging from the likes of HSBC, GlaxoSmithKline and Icap plus the influential Hundred Group of Finance Directors have submitted their views on the watchdog’s plans to increase competition among the Big Four by forcing companies to put their audits out for tender every five years.
The consensus is not good. The measure, so they argue, will not improve competition – in fact it will likely achieve the opposite, while adding to costs, disrupting business and ultimately failing to improve the overall quality of audit.
I previously argued in this blog that the Competition Commission should give the FRC’s own guidelines on ten-year tendering to bed in before increasing the frequency of tenders.
Based on the responses sent to the commission – almost all seem to favour the FRC’s approach – I feel it should refrain from digging its heels in over the issue and listen to the clamour from business.
After all, the tender period is only one element to the proposals and while it grabs all the headlines, there are other remedies – such as the removal of Big Four-only clauses – that will do more to improve competition.
And on the point of improving audit quality, efforts to alter the auditors’ report to include more information – currently being discussed by host of the profession’s regulators – will have a much more lasting effect than anything the Competition Commission has suggested.
Richard Crump is deputy editor of Accountancy Age and Financial Director