OFT backs ‘reduced’ audit to aid competition

THE OFFICE OF FAIR TRADING has proposed that reducing the demands of statutory audit could be one way of improving competition for large company audits in the UK.

The views come as part of the OFT’s response to the EU’s consultation on audit.

“We believe that consideration should be given to a reduced form of statutory audit.

“As well as potentially reducing the burden on companies, reducing the requirements of statutory audit might stimulate switching to smaller auditors that are able to undertake a more limited audit,” said the OFT.

The EU’s consultation, launched by internal markets commissioner Michel Barnier in October last year, climaxes with a two day conference in Brussels starting tomorrow on the subject of reforming the audit market.

So far the consultation has received 700 submissions from around the world, thought to be one of the highest response rates for any set of EU proposals.

In its submission the UK government was pessimistic on whether an improvement in audit competition could be achieved without incurring prohibitive costs.

“The Government will be working closely with the FRC on its review.

“Without in any way wishing to prejudice the outcome of that review, the
Government’s initial view is that, with the current (four-player) state of
the audit market, it may be difficult to identify measures that will be
effective in increasing choice for the largest audits without also
imposing major costs. Those costs might be hard to justify.”

The EU conference will see a Stephen Haddrill speak on the second during a session on whether audits are fit for purpose.

In its submission to the consultation the FRC said it wanted to see a change in the rules for audit firm ownership and a pohibition on banks forcing clients to use only Big Four auditors.


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