Grant Thornton is calling for direct regulatory intervention in the audit
market that would limit the number of audits a firm could hold among public
The call comes in a submission to the House of Lords economic affairs
committee which is conducting an inquiry into the dominance of the Big Four
firms and constitutes the most emphatic public demand yet for regulators to
directly intervene in the market.
Among the other proposals made by Grant Thornton are a code of conduct for
investors urging them to promote the use of auditors outside the Big Four. Grant
Thornton also wants to see the “prohibition” of so called restrictive covenants
– clauses placed by banks in credit agreements insisting that only Big Four
firms be used on an audit.
Grant Thornton’s submission says: “The soft touch initiatives by the FRC have
demonstrably not worked. While there is no silver bullet , we believe that
regulatory intervention could achieve meaningful changes in the structure of the
audit market to widen and deepen participation beyond just four firms over, say,
a five year period.”
The August 2010 Hemscott report shows that the Big Four have all the FTSE-100
audits except one, Rand Gold Resource, which is undertaken by BDO. In the
FTSE-250 all but 10 of the audits are Big Four appointments. The Big Four also
dominates the Small Cap or fledgling market. The AIM market is the only one
which sees significant competition to the Big Four from Grant Thronton and BDO
along with Baker Tilly.
Grant Thornton’s submission was signed by chief executive Scott Barnes.
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