UK finance directors and accountancy firms are headed for a major clash after
fierce disagreements emerged between the Hundred Group and leading auditors over
the introduction of joint audits.
Writing in response to the Financial Reporting Council’s discussion paper on
choice and competition in the audit market, Hundred Group chairman Philip
Broadley said joint audits would enable smaller firms to build expertise and
break into the FTSE 100 audit market. But the Hundred Group’s proposal has been
met with fierce opposition, as even mid-tier firms, the potential beneficiaries
of joint audits, slammed the idea.
In the Hundred Group’s response, Broadley made the radical call for
regulations to be amended in order to promote joint audits. ‘Increasing the
propensity of non Big Four or new firms to seek to participate in the audit
market for large companies could be encouraged by a modification of auditing
standards to make it easier for the audit of large groups of companies to be
undertaken by more than one firm,’ Broadley said.
But Don Hutchison, BDO Stoy Hayward’s national head of audit rejected the
proposal outright, arguing that it would cause tension between rival firms and
ramp up costs. ‘The concept of joint audit is not one that is well received in
the Anglo Saxon marketplace. In the UK it just results in bun-fights between
firms and increases the cost of audits,’ Hutchison said.
His views were echoed by Grant Thornton’s national managing partner Michael
Cleary, who said joint audits would require ‘artificial intervention from
regulators’. ‘Inherently a joint audit increases costs for audit clients and its
shareholders and increases bureaucracy,’ said Cleary.
But Mazars backed the joint audit route: ‘In our opinion, joint audit – where
two firms with equal roles jointly form an opinion on the financial statements
of a group – would be a potential solution with strong appeal,’ Mazars’ David
Herbinet told the FRC.
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