ON FRIDAY, the Office of Fair Trading delivered the verdict we were all waiting for – a call for the powerful Competition Commission to investigate audit.
After a tumultuous year for the profession, the announcement didn’t make quite as many ripples as it might have.
Audit has been in the spotlight since the dread financial crisis of 2008, possibly because slating accountants is a less scary prospect than tackling the banks.
In late 2010, the House of Lords turned its attention to audit competition and choice and the Big Four was up in arms about a possible referral to the OFT, denying claims of excessive concentration at the top of the market.
In April, chancellor George Osborne used the Budget to call for an end to banking covenants, saying the clauses – which force clients to choose a Big Four auditor – are bad for business.
So when the Lords finally unveiled their conclusions in late June, the Big Four had adopted more of a conciliatory stance, while the mid-tier were hopeful of dramatic recommendations
Sure enough, the Lords asked the OFT to take a look, and in came the barrage of comments, complaints and congratulations.
But last week’s revelation that the OFT has called in its scarier big brother, the Competition Commission, has elicited little more than lacklustre murmuring.
Partly, this is because the referral was widely expected, and stakeholders have already made their positions clear.
In July, the OFT announced the preliminary conclusions of its inquiry into a possible Competition Commission referral, and all signs pointed to yes.
It then undertook a further six-week consultation, during which the Big Four expressed little hope of avoiding a referral and the mid-tier tried to be gracious in their jubilation.
So when a commission investigation was finally announced, nobody was very surprised.
However, there is a bigger reason the decision has provoked little reaction, and that is the spectre of Brussels’ audit reform.
In September, Accountancy Age obtained the European Commission’s draft audit reform paper, and the proposals it contained goaded stakeholders into furious commentary and debate.
Suddenly, the prospect of a UK-focused competition investigation seemed positively welcome to the Big Four, when set against the apparently unbounded radicalism of EC proposals.
Where before the Big Four bemoaned the Competition Commission’s costly two-year investigation, now they praise the watchdog for its focus on evidence and empirical conclusions, comparing it favourably to Barnier’s “personal crusade”.
Mid-tier firms maintain their support for the OFT’s referral, but their eyes too are focused on the bigger prize of EU-level measures, and their response to the Competition Commission announcement was consequently muted.
It seems that to push through controversial decisions, one need only have a bigger, scarier alternative on the horizon, encouraging stakeholders to welcome the first option with open arms.
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