‘Ten years’ to see fruits of mandatory rotation – Non-Big Four auditors

CLAIMS that mandatory auditor rotation “further entrenches” the Big Four are premature, according to senior auditors from non-Big Four firms.

Earlier this month, EY head of audit Hywel Ball told Accountancy Age he believes mandatory rotation is reinforcing the Big Four’s dominant position in the large listed market while also forcing them to tender for clients further down the market.

Greater churn at the top of the market, coupled with companies’ preference to remain with Big Four auditors, causes the firms to cast their sights downwards, Ball said.

Not the case long-term

But while that may be the case today, audit partners from BDO, Grant Thornton and Mazars do not believe it will be the case long-term.

“Yes, they do still dominate the larger company market,” BDO head of audit James Roberts told Accountancy Age, “We’ve always said [making inroads into lthe arger company market] is a five-to-ten year game. Non-execs who chair audit committees have effectively grown up with the Big Four over a very long period of time and we had no expectation to change the market in any speedy way.”

But should there be little or no sign of any improvement, a review and further regulation may follow in order to catalyse the process, according to Mazars global head of audit David Herbinet.

“The European Commission has been very clear that they want more competition in the market,” Herbinet said. “They have brought in this regulation to create more competition, and if this regulation doesn’t result in more competition, they will review the situation again in probably three years and come back. Market participants have to understand that unless there’s more competition there might be more constraining regulations.”

In the interim, Roberts suggests non-audit work is the best way to introduce his firm and others into the larger company market.

He said: “We are seeing lots and lots of opportunities from these companies as they’re increasingly wanting to meet new suppliers for non-audit services. Those companies will be much more familiar with us and our capabilities by the time the next tenders come around. They’ll see us as credible as any other supplier.”


On the point of the Big Four turning their attentions to the mid-market, Roberts added such behaviour is cyclical and fairly short-lived.

“It’s true that if they’re having a slow period, the Big Four do move down to the mid-market,” Roberts said. “But when they get busy again, they do rather forget it.”

One suggestion to expedite the process comes from Herbinet, who suggests a central, public listing for listed companies’ audits.

“Nobody knows how the market will react once audit regulation is enacted in the UK,” Herbinet said. “There are requirements in the audit reform [in June] about opening up the list of audit firms invited to tender. That may have a more of an impact on market behaviour than some people think.

“At the moment there is no mechanism for audit firms to be made aware of tenders unless they are specifically invited by the company,” he added.

It’s an idea Grant Thornton audit partner Sue Almond is open to, although she queries whether it will have a tangible effect on which firms win audits.

She said: “In some ways it could enhance the transparency, and transparency has got to be encouraged. When you go into the realities of these things, the success or otherwise of the audit tender often goes through things like sector knowledge, experience and knowledge of the firm that is already there – perhaps experience of having worked with them. So whether it would increase your chances of success, I’m not entirely sure.”

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