PracticeAuditOverview: audit competition debate

Overview: audit competition debate

Prospects: The audit competition debate has stepped up a notch

The debate into audit competition recently moved into high gear recently with
the setting-up of the Market Participants Group. An offshoot of the Oxera debate
launched by the government into audit choice, the MPG is set to take forward
some of the ideas, and the heart of the discussion, into one of the most
controversial issues in the profession today.

WHAT HAPPENED

The Financial Reporting Council, which is shepherding the debate, last week
announced the members of the MPG.

The group is split into three. Auditors are represented by Michael Cleary of
Grant Thornton (flying the flag for both BDO and GT), Peter Wyman of
PricewaterhouseCoopers, John Connolly of Deloitte and David Herbinet of Mazars.

Buyers of audits are represented by Philip Broadley of Prudential and The
Hundred Group of finance directors, David Robertson, FD of Mears Group, Brian
Walsh, the chairman of Nationwide’s audit committee, and by Professor Ian Percy,
deputy chairman of the Weir Group and Ricardo.

But perhaps most interesting are the investors. None are well-known in
relation to audit and governance issues.

Huw Jones is director of corporate finance at M&G. Jones has been with
Prudential, which bought M&G in 1999, since 1972.

Michael Power is FD at JP Morgan Cazenove. Derek Scott is chairman of the
Stagecoach Group pension scheme trustees, and was previously the finance
director of Stagecoach. Scott and Power may therefore have an insight both as
buyers of audits, and as investors as the people who ultimately rely on them.

The final member of the group is Robert Talbut, of Royal London Asset
Management. Talbut is chief investment officer there and is deputy chairman of
the ABI’s investment committee.

WHAT’S GOING TO HAPPEN

Nobody precisely knows, and the make-up of the group has thrown up more
questions than answers. Wyman’s views are well known, and Deloitte’s and Grant
Thornton’s will not be difficult to guess. Herbinet at Mazars is more
unpredictable, but he has taken a controversial line on joint audits. Broadley
is pro-choice, while the other FDs are unknown quantities.

The time seems right for the investors to set out their stall. It’s unclear
too what they think and how they might be disposed, but they all have the
opportunity now to feed into a debate that is likely to shape the future of the
audit profession.

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