Oxera: The return – it’s nothing to FEAR

It was Oxera, remember, that produced the report that set off the whole
debate on the regulation of audit firms in the UK with its conclusion that more
large audit firms were needed to serve the FTSE 350. Since then speculation has
centered on what could be done about it, with the view growing that there was
very little in the pipeline. Certainly the Big Four have argued vociferously
that four is enough, though more, they add, would be useful.

But the latest Oxera review, ordered by the European Commission, if we
understand correctly, will look at current legislation and the parts that govern
ownership of audit firms. Crucially, retaining Oxera will be seen as vindication
at the highest level for its earlier report that took a lot of flak. More
important relaxing ownership would be a radical step with the intention of
creating access to capital that would enable big firms to be created at an
accelerated rate.

We’re a long way from Oxera’s conclusions but there will no doubt be furious
lobbying to come. With ownership high on the agenda there will be much energy
invested in shoring up the current rules.

But the debate is worth having. There’s no harm in the profession examining
itself and asking these tough question.

Should audit firms be owned only by auditors? It’s likely that many in the
profession are prepared to say that it is no longer a necessary prerequisite for
a reliable and quality audit profession. But it could also be the measure that
deals with competition issue highlighted by Oxera. If that’s the case, then it’s
an issue worth serious consideration.

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