According to Kevin Ellis, chairman of PWC UK, the collapse of UK government contractor Carillion amid allegations of financial misreporting thrust corporate auditing into the spotlight, but supervisors' tests and changes should be measured to avoid costly disruption and unintended consequences.
Parliamentary committees last week asked the UK competition watchdog to consider breaking up the Big Four accounting firms, Deloitte, KPMG, EY and PwC.
After a company failure of this size, MPs have homed in on issues of audit quality, limited choice in the audit market and conflicts of interest within the Big Four. Whether these concerns are fair, there is clearly a perception problem that must be addressed.
PwC supports the idea of having the Competition and Markets Authority study the audit market. The EU has adopted rules that require companies to change auditors regularly and limit the other services that a company’s auditor can provide.
These rules have increased the focus on quality and have driven innovation. But they have not increased choice in the publicly listed company audit market: the four biggest accountancy firms audit more than 97 per cent of FTSE 350 companies.
Politicians, investors and auditors all want to restore society’s trust in corporate audits. Changes are needed, but no one wants to see measures that fail to deliver the intended benefits, and instead bring costly disruption and unintended consequences for the UK economy.
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