BDO ‘misused’ audit research

PricewaterhouseCoopers, the UK’s largest audit firm, has accused BDO Stoy
Hayward of ‘misusing’ the LSE’s research into audit choice to make the case that
market concentration has led to an increase in audit fees.

Richard Sexton, head of assurance at PwC, believes BDO wrongly interpreted
the London School of Economics report Concentration, auditor switching &
fees in the UK audit market, which was published in February.

‘Misusing LSE’s analysis to make such a point, and to try to tilt the playing
field in favour of new entrants, is not helpful,’ he wrote in an article
published in today’s Accountancy Age.

He said that it was unclear whether the report showed a correlation between
market concentration and audit fees. ‘It is BDO’s attempts to present the
research as showing causality that raises eyebrows,’ said Sexton.

Jeremy Newman, BDO’s managing partner, said: ‘We have not attempted to use
the research to show causality ­ the LSE specifically identifies the link
between concentration and audit fees.’

‘It concludes that during 2002 to 2006, increases in the joint market share
held by the largest four auditors are strongly correlated with higher audit fees
paid by UK-listed corporate clients.’

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