FTSE 350 AUDIT business is rarely going out to tender, despite evidence that companies that switch auditors have achieved cheaper and better-quality audits.
Research carried out as part of the Competition Commission’s (pictured) inquiry into the statutory audits of FTSE 350 companies, which surveyed more than 600 CFOs, FDs and audit committee chairs, found little desire among respondents to change auditors.
According to the survey, FTSE 350 companies have used the same auditor for an average of 11.3 years, while 59% have not changed auditor for at least five years.
More than a third of companies were found to have used the same Big Four auditor for more than 11 years, with 14% using the same firm for more than 20 years.
However, in instances where companies had switched their auditor, more than half experienced a reduction in cost and 64% reported an improvement in audit quality.
When switches have been made, the Big Four has mopped up almost all of the business on offer. According to the research, 97% of all switches made by FTSE 350 companies in the last five years have been to or within the Big Four.
Reasons most likely to prompt a change in auditor included complacency of the audit firm, a substantial increase in audit fee or a problematic relationship between auditor and management. However, only 38% said a scandal related to their auditor would lead them to dispense with their auditor.
PwC has been hit with a £2.3m fine by the accountancy watchdog over its audits of the financial statements of Cattles and Welcome Financial Services Limited
KPMG has retained its position as the listed company auditor, according to the latest Adviser Rankings.
While everyone values audit quality highly we must be be careful that we don’t let it deter talent. We need to guard against its commoditisation and the threat to a unitary profession
Commissioning and preparing an asset valuation for financial reporting should involve a three way dialogue between the client, valuer & auditor