PwC on the attack over Competition Report findings

PwC on the attack over Competition Report findings

Chairman and audit head publicly attack report's claim that PwC merger drove up fees

competition report

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.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

1m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

2m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

3m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

3m

Related Articles

Goldman Sachs chooses Mazars for audit – but does it really matter?

Audit Goldman Sachs chooses Mazars for audit – but does it really matter?

3d Tom Lemmon
Audit sector needs a bold new regulator

Audit Audit sector needs a bold new regulator

4d Sam Walsh and Richard Khaldi, Regulation and transformation experts at PA Consulting
KPMG UK announce new audit structure – but is it enough?

Audit KPMG UK announce new audit structure – but is it enough?

1w Tom Lemmon
Will Deloitte get 5-year ban in India?

Audit Will Deloitte get 5-year ban in India?

3w Tom Lemmon
The CMA has released its final report into the future of the audit market

Audit The CMA has released its final report into the future of the audit market

1m Beth McLoughlin, Managing Editor
The madness of audit independence

Audit The madness of audit independence

1m Clive Viegas Bennett, CEO of MGI Worldwide
Life after BHS, Carillion, & Patisserie Valerie: Is there light at the end of the tunnel for audit?

Audit Life after BHS, Carillion, & Patisserie Valerie: Is there light at the end of the tunnel for audit?

1m Lucy Skoulding, Reporter
Audit vs R&D: “There is a clear conflict which accountancy firms aren’t dealing with”

Audit Audit vs R&D: “There is a clear conflict which accountancy firms aren’t dealing with”

2m Beth McLoughlin, Managing Editor