UK corporates unprepared for cost of audit rotation reforms

UK corporates unprepared for cost of audit rotation reforms

Huge portion of FTSE 350 companies unprepared for imminent EU audit reforms

AROUND A FIFTH of FTSE 350 companies are “woefully unprepared” for the EU’s audit rotation reforms set to take effect in June, according to research from Big Four firm EY.

EY’s survey of 100 CFOs, tax directors and audit committee chairs showed that 19% of respondents didn’t know when their company needed to tender or rotate its audit. And of those that did, almost half hadn’t yet put a strategic plan in place.

Approximately 28% of firms said they also lacked full understanding of the proposed restrictions on non-audit services, with a handful (7%) stating they had no knowledge of the changes at all.

The EU’s move is intended to open the FTSE 350 market up to more audit firms such as Grant Thornton and BDO.

Yet while 61% of those surveyed said they are planning to invite tenders from at least one non-Big Four firm, intentions aren’t necessarily becoming a reality. In the last six months there have been 25 audit tenders completed by FTSE 350 companies, but none have been awarded to a non-Big Four firm.

Last month, EY managing partner of assurance in the UK & Ireland Hywel Ball told Accountancy Age mandatory rotation could “further entrench” the Big Four’s market position, and even see them encroach on traditional non-Big Four market space. However, several non-Big Four audit partners disputed his assessment, suggesting it could take as long as ten years to see the fruits of the regulation.

Hywel Ball said: “As expected, some companies have been moving ahead of the regulations, with over half of the FTSE 100 having tendered their audit since the spectre of the regulations loomed. But we haven’t seen the same level of preparation among the rest of the FTSE 350, with less than a quarter having tendered so far.

“This was never going to be a cost free exercise. Choosing an auditor and managing the mix of non-audit services is one of the biggest procurement decisions a company has to make. It requires a major time investment when going through the tender process and then bringing the new team up to speed, all of which carries an internal cost to the company.”

Share

Subscribe to get your daily business insights

Resources & Whitepapers

The importance of UX in accounts payable: Often overlooked, always essential
AP

The importance of UX in accounts payable: Often overlooked, always essentia...

2m Kloo

The importance of UX in accounts payable: Often ov...

Embracing user-friendly AP systems can turn the tide, streamlining workflows, enhancing compliance, and opening doors to early payment discounts. Read...

View article
The power of customisation in accounting systems
Accounting Software

The power of customisation in accounting systems

3m Kloo

The power of customisation in accounting systems

Organisations can enhance their financial operations' efficiency, accuracy, and responsiveness by adopting platforms that offer them self-service cust...

View article
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y Accountancy Age

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
8 Key metrics to measure to optimise accounts payable efficiency
AP

8 Key metrics to measure to optimise accounts payable efficiency

3m Kloo

8 Key metrics to measure to optimise accounts paya...

Discover how AP dashboards can transform your business by enhancing efficiency and accuracy in tracking key metrics, as revealed by the latest insight...

View article