There should be greater concentration among smaller audit firms, according to
the UK’s audit-quality watchdog which fears lax standards is caused by a
profusion of competition.
Paul George, director of the Professional Oversight Board (POB), which sits
within the Financial Reporting Council, said there should be “greater
concentration at the bottom end of the market”.
George believes firms who only undertake a small number of audits find it
difficult to build-up enough experience to maintain high standards and build up
enough expertise to handle complex audits.
“I would welcome greater concentration at the bottom end of the market
because it would make the investment in maintaining competence, proportionate to
the income – basically firms can make a living doing it,” he said.
“Those firms which have sufficient market share to conduct less complex
audits, when they get particularly complex engagements, it may be harder for
them to maintain that degree of competence.”
Last month the POB released a study of 11 audits which found eight were not
up to scratch. At the time George said he would speak to BIS officials about
bringing in a licensing system for smaller auditors.
There are 7,843 auditors in the UK today, falling from a 2004 high of 9,950.
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