THE BIG FOUR have responded to the House of Lords report on audit, and their reactions reveal a mixture of indignation and thirst for change.
Enhanced dialogue between auditors and regulators enjoyed universal approval, with the firms eager to show the steps they have already taken to achieve this gold standard.
The Lord’s recommendation for an investigation by the Office of Fair Trading elicited a more guarded response. Some said they were disappointed at the committee’s failure to respect the role of market forces, arguing interference is unnecessary.
Ernst & Young said the question is “complex”, but they are happy to co-operate with the investigation, while PwC was more rebellious, insisting quality and value are the only considerations upon which tenders could and should be awarded.
But KPMG notably came down on the side of an OFT inquiry, saying it would “bring to a head the long-running debate on competition and choice”, and Deloitte also scrambled to indicate its assent.
Auditors were stung by the cries of “dereliction of duty” and “complacency”; they rejected the Lords’ conclusion in this respect and pointed to the committee’s acknowledgment that they had fulfilled their duties “in a strictly legal sense”. All four ignored the qualification of this statement, where the Lords concluded “that in a wider sense, they did not do so”.
The Big Four did not agree with the committee’s view of international reporting standards, rejecting the notion that they had contributed to the financial crisis, but all four were open to discussions on enhancing the role of audit.
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