AUDITORS have welcomed the referral of the audit market to the Competition Commission by the Office of Fair Trading.
The OFT referral has a particular emphasis on large company audits in the UK. The decision to make a market investigation referral follows a public consultation involving several audit firms and regulatory bodies, which closed in September.
The Big Four audit firms, who are likely to face the brunt of scrutiny from the Commission, have all welcomed the move with Grant Thornton and BDO following suit.
PwC‘s board member for reputation and policy said: “We see this market investigation as an opportunity to show that this is a fair and competitive market. We also believe that the evidence that will come out of this review will help to inform the ongoing European debate on the provision of audit services.”
A statement from KPMG echoed the notion that shining a hefty a spotlight on the situation could ease concerns raised in the way the audit market works.
“We welcome a Competition Commission inquiry to bring to a head the long running arguments and discussions over the structure of the UK audit market.
“We look forward to a thorough process of gathering the data and doing the analysis before reaching any conclusions on the need for market intervention.”
Ernst & Young erred on the side of increasing competition among the top auditors of the largest companies: “Although strong competition for audits among the existing players is alive and well, we support increased choice in the large listed company audit market, to enable audit committees to have a wider range of audit firms to choose from when seeking a high quality audit.
However, Deloitte‘s CEO David Sproul warned the Commission will need to ensure that changes do not suffer the law of unintended consequences: “”We are firmly of the view that any changes to the audit market must not be to the detriment of audit quality and should not harm the UK’s critical growth prospects, competitive advantages as a business location and centre for capital market activity.”
Fifth largest firm Grant Thornton seemed to be hopeful that having a spotlight shone on the market could increase competition in the FTSE: “There are a number of steps that can be taken and concerted efforts by the Competition Commission, the EC and investor groups will begin to reduce concentration in FTSE 350 audits over the next few years, creating a market based on the quality of audit provision rather than an arbitrary cut off point that restricts access to the market to just four firms,” said audit partner Steve Maslin.
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