PracticeAudit‘Compelling’ need to tackle Big Four issue

'Compelling' need to tackle Big Four issue

US audit choice report backs status quo and comes under fire from UK regulator

There is a compelling need to tackle the dominance of the Big Four audit
firms, FRC chief executive Paul Boyle has said, taking issue with a US
government report that backed the status quo.

The US Government Accountability Office released a report last week that
found that the lack of more large firms auditing public companies did not
significantly push up audit costs.

Instead the GAO, the equivalent in the US of the National Audit Office, found
that other costs, including regulatory changes, the cost of attracting employees
and the increasing complexity of transactions auditors are required to look at,
had all led to higher fees.

‘Their report recognises that there are significant problems of concentration
in the audit market. But then they looked at possible solutions and decided that
there is no clear consensus on what would be the most appropriate action and
what needs to be done,’ Boyle said.

‘Our judgment differs. We agree that current levels prevent significant risks
and the fact that there are risks means there is a compelling need to do
something. We don’t share their views on this point.’

A powerful US committee led by former SEC chairman Arthur Levitt is currently
looking at the dominance of the Big Four.

The GAO report may be seized upon by lobbyists for the Big Four as official
confirmation of their view that there is sufficient competition in the market.

The GAO argued that ideas of mandatory rotation, better disclosure of audit
fees and breaking up of the Big Four would prove ineffective.

The agency’s findings were based on a survey of companies, auditors,
academics and regulators.

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