PwC has rounded on the UK’s corporate reporting watchdog over its suggestion
the Audit Commission could be transformed into a big-five audit firm.
Paul Woolston, head of public sector assurance at PwC, criticised the
Financial Reporting Council’s suggestion the Audit Commission be used to create
a fifth player in the audit industry, currently dominated by the Big Four – PwC,
Ernst & Young, Deloitte and KPMG.
“It is at least ironic that the FRC has said what it has, in that the Audit
Commission itself has operated with a large monopoly,” he said.
“It is odd that the FRC is concerned about any one organisation having the
In its submission to the House of Lords Economic Affairs Committee, the FRC had
stated the abolition of the Audit Commission could be used as a catalyst for
greater competition in the audit market.
“The commission’s in-house audit practice is the fifth largest in the UK…if
secured by a non Big Four firm it would enhance their scale and strength and so
reinforce their ability to compete,” the body said.
“Conversely, if the work goes to the Big Four, the reverse will be true.”
The Audit Commission, earmarked for abolition in 2012, is responsible for the
audit of 11,000 bodies, which together spend some £200bn of public money.
The commission received £213m in revenue in 2010, a slight reduction on the
2009’s £216m. The body distributes 30% of public sector audits between a handful
of firms, chief among them PwC which earned £12m in the last year. Fellow Big
Four firms KPMG earns £11m and Deloitte £6m.
The firms have established public-audit departments and could benefit should
the work be put out to tender.
Woolston said further education colleges, NHS Trusts and former polytechnics
were examples where audit tendering had worked in the
“I’m happy for other firms to compete. It would be for the clients and
audited bodies to decide what is best,” he said.
Public sector work would particularly benefit large audit firms. The audit
season begins in the second half of the year when private companies generally
file their annual accounts. Public sector audits however generally finish in
March. This enables audit firms to make better use of their auditors during
their “down time” in the first half of the year.
The Audit Commission is also concerned the price of audit would rise if it
were put to the market, and smaller bodies, like Parish councils, would find it
difficult and costly to organise a tender process.
It has also suggested its fraud detection regime be handed to the National
The Department of Communities and Local Government must decide on a course of
action in time for legislation to be drawn up next year.
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