Government thinking on audit market revealed
Auditors need more "scepticism", according to ministers who also believe breaking up the Big Four is risky and Big Four only credit deals should be subject to review by the competition authorities
THE GOVERNMENT has suggested that auditors require more “scepticism”, a proposal first made by the Financial Services Authority last year.
Government also remains unconvinced that action is needed to reform the market for large company audits currently dominated by the Big Four firms.
The insight comes in a summary provided by the Commons European scrutiny committee of a letter from the department of business to an EU consultation on the audit market. The letter was issued from the office of employment minister Edward Davey(above).
The summary forms the first substantial insight into the thinking of the new government on issues dealing with the audit market and how it might be changed or regulated in the future
Though it has not published the letter, the committee has provided an extensive summary of the views it contains. The EU internal markets commission is due to reveal some of the results of its consultation during a conference in the second week of February.
The committee also summarises the government’s view that any “forced” break-up of the Big Four to resolve the concentration of the audit market would have to take place on a global scale and could risk “unintended consequences”.
The summary also reports that government believes that the use of restrictive clauses by banks forcing clients to use Big Four auditors only during credit negotiations would be a matter for the competition authorities.
There is also support from government for more oversight of international accounting networks. Currently there is little or no regulation of international bodies. Accountants are regulated at national level only.
Fresh ways organising audit firms are also supported by the government which is reported to be keen on a review of the way firms are capitalised so that an expansion of the audit market could take place.
A two-day conference is due to take place in Brussels on the 9 and 10th February to discuss the reform of the audit market and its regulation. It comes on the back of EU commissioner Michel Barnier launching a green paper consultation on financial reporting and audit.
Yesterday former City minister Lord Myners told a House of Lords inquiry that Big Four dominance should be diluted and that an Office of Fair Tracing review could be the answer.