Smaller firms are to be allowed into the public sector audit market to serve customers the big firms do not want. Andrew Foster, head of the Audit Commission, announced on Monday that BKR Haines Watts has been awarded a contract to audit small councils in Hertfordshire and Buckinghamshire as part of an effort to open up the lower end of the public sector audit market. Haines Watts’ success came as Foster responded to criticism that the share of the Commission’s work going to private sector firms was too small. Evidence given to a Commons select committee investigation by KPMG claimed that a 30% share of the Commission’s work was too little and more was needed to keep the firms interested. Foster responded by stating the shares were not fixed and that the private sector is able to bid for more Commission work through ‘market testing’. He said the current domination of 70% of the market by the Commission’s own agency, District Audit, had come about purely as a result of competition. ‘We’re opening up the bottom end of our market to smaller firms who are more used to dealing with smaller accounts. ‘The 70-30 share is definitely not a fixed one. The truth is District Audit has been trying to protect its market share by getting better and better,’ he said.
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