PwC on the attack over Competition Report findings
Chairman and audit head publicly attack report's claim that PwC merger drove up fees
PricewaterhouseCoopers rolled out its big guns at a meeting yesterday in a
concerted effort to discredit some findings of a joint government and Financial
Reporting Council report into audit choice.
Kieran Poynter, chairman of the Big four firm, used the public meeting on the
report to cast doubt on some of the results, backed by PwC head of assurance
Glyn Barker.
In particular, both attacked the mathematical model that predicted the firm’s
audit fees rose 12% from one year to the next following the merger of Price
Waterhouse and Coopers & Lybrand in 1998, due to market concentration.
‘If you look at actual audit fees over the last ten years they have not gone
up by 12% compound,’ argued Poynter. ‘It is just not the case, let alone 12%
compound for this one reason. Taking all the reasons together, audit fees
haven’t gone up by that much.’
Barker said that there were a number of industries ‘where concentration has
led to efficiency and price reductions, and while the report may have identified
a correlation between market concentration and fee rises, that doesn’t
necessarily conclusively imply causation.’
Defending the report, Dr Gunnar Niels, director at consulting firm Oxera,
which undertook the research said he could not comment on cause and effect ‘but
that is clearly what the data is telling us’.
Poynter also suggested that the low auditor switching rate by companies may
be associated with a high level of satisfaction, and that where companies have a
lack of choice over auditor it may be because they have made choices over where
to get their non-audit services instead.
He also dismissed the report’s assumption that insurance comprised one of
three components of an audit.
‘None of the Big Four are in the business of providing insurance,’ he said.