Mazars and ACCA have released their response to the BEIS statutory audit review consultation last week, and while both called for meaningful reforms, they remained at odds over joint audit.
Mazars, strong champions of joint audit, argued in their response to BEIS that adopting joint audit is the only way to build resilience in the audit market for Public Interest Entities and provide sufficient incentive for challenger firms to make the investments necessary to build the market share in the FTSE350 and other Public Interest markets.
Phil Verity, Mazars UK Senior Partner, called on BEIS to be “brave” and implement the CMA’s recommendations in their entirety.
“We believe that substantial reform to the audit market is critical to the sustainable success of our largest companies and the wider economy. The CMA’s review represents the clearest opportunity in decades for real change, and collectively we must maintain momentum and pursue brave solutions,” he said.
“We are confident that implementation of the reforms as proposed by the CMA will create vastly improved market conditions for challenger firms, and in that case Mazars is committed to a programme of ambitious and sustained investment.”
No evidence that joint audit improves quality
However, ACCA said there was “no evidence” that audit quality for large listed companies would increase through joint audits.
“ACCA is not supportive of the joint audit proposal in the CMA’s interim study, and our position remains unchanged,” said Maggie McGhee, ACCA’s executive director.
Mazars said they “strongly support” proposals for the FTSE 350 whereby each audit involves at least one challenger firm, subject to limited exemptions to be agreed with the regulator. But ACCA remained opposed.
“The final proposal which requires FTSE 350 companies, with limited exceptions, to be jointly audited by at least two audit firms, with at least one being a non-Big Four firm, does not address the concerns that we raised in our initial response,” McGhee said.
“There is an insufficient evidence base to demonstrate that the proposal will not be detrimental to audit quality – the evidence from academic research is mixed at best.
“ACCA recommends using the joint audit proposal for a five-year review of progress to trial, rather than mandate, recommendations in order to give an informed and balanced understanding of their viability.”
While both Mazars and ACCA clearly want reform, McGhee went on to warn BEIS’ new secretary of state Andrea Leadsom that she should “consider carefully the evidence base available in support of each suggestions, the related cost/benefit analysis, and the practicalities of implementation.”
Mazars on the other hand, urged the CMA’s recommendations to be approved in full.
“Previous attempts at reform have not brought about the necessary change, and the CMA’s rigorous, independent process has delivered a bold, meaningful and practicable path to reform. The firm strongly encourages BEIS to grasp this opportunity to implement the CMA’s recommendations in their entirety,” they said in a statement.
“There is consensus that now is the time for change, and we look forward to working with our peers to deliver an audit market that works in the interests of society as a whole,” they added.