Audit market ‘barriers’ worry Competition Commission

Audit market 'barriers' worry Competition Commission

Competition Commission flags up high barriers to entry as one issue among many affecting the audit market

HIGH BARRIERS to entry and low auditor switching are among the issues identified by the Competition Commission in its first look at the audit market.

The watchdog will spend two years examining potential areas of concern, and has outlined six “theories of harm” as to how these could negatively impact on the market.

Among these are “significant and non-transitory barriers to entry and expansion”, high concentration of Big Four auditors among FTSE 350 firms and the “significant” size differential between them and mid-tier competitors.

The commission warned these could lead to poor audit quality and innovation, high prices and less competition in non-audit markets.

PwC’s Richard Sexton accused the commission of heavy reliance on Office of Fair Trading analysis, arguing it did not provide “an accurate picture of the nature and level of competition in this market”.

Sexton suggested “thorough analysis” would demonstrate that the audit market is “highly competitive” and rivalry among the largest firms is fierce.

He noted shareholders vote annually on auditors’ reappointment and said companies are “sophisticated, demanding and discerning buyers of professional services who choose their auditor based on quality and price”.

BDO audit partner James Roberts was more enthusiastic, saying the commission’s statement of issues “covers the ground we hoped and expected it would”.

“It lays out the sort of path the investigation is likely to follow, but doesn’t exclude other avenues as they arise. As a starting point it seems an entirely sensible one,” he added.

Stakeholders have until 12 January 2012 to submit evidence in this initial stage.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource