Audit choice lurches closer to reform

At the second stakeholder meeting occasioned by the Oxera report into audit
choice, FRC chief executive Paul Boyle called for nominations for the Market
Participants Group to be made by 29 September.

‘The first exercise of the group would be to sift through over 100 good ideas
submitted by various stakeholders on this debate, and to prioritise which ones
are worthy of exploring further,’ Boyle said.

The group will discuss suggestions including: breaking up the Big Four; joint
auditing between large and small firms; and opening up the audit files of
departing firms to incoming auditors.

But the agreement on the establishment of the group masks deep divisions in
the feelings of participants as the debate progresses. PricewaterhouseCoopers
has maintained that the argument on choice is itself misconceived. Peter Wyman,
head of professional affairs at the firm, said this week: ‘If someone arrived
from Mars, they would think the profession was in a terrific crisis. Research
shows the fund managers have lots of confidence in the market and London is
benefiting by the billions. We must be careful we don’t take steps to damage

Meanwhile, investors are seeking more radical approaches. Head of investment
affairs at the Association of British Insurers Peter Montagnon noted that the
Competition Commission should be keeping an eye on the audit industry.

He added that there was a feeling among members of the association that there
was a serious risk of over-regulation. ‘This could serve to preserve rather than
drive business. The audit profession is not immune to the rules of competition
that apply to others,’ he said.

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