22 July 2013

FT: Audit remedies fail to please Big Four's critics

The Competition Commission's investigation into the dysfunctional UK audit market has generated a mountainous mass of paperwork since it started in late 2011. The remedies it announced on Monday were too lightweight for some, however.

The Competition Commission had mooted capping the maximum tenure of an audit firm at between seven and 14 years but has now decided against pursuing such a policy of “mandatory rotation”. Instead, it will require FTSE 350 businesses to put their audit out to tender at least once every five years. They are currently only encouraged to re-tender at least once a decade.

“We still maintain our view that a ‘backstop’ of an upper tenure limit of 15 years for audit firms should be introduced to fully address our concerns around auditor independence and audit quality”, USS said.

Mazars – a second-tier auditor that wants more opportunities to bid for work in a market dominated by the “Big Four” of PwC, Deloitte, KPMG and EY – also said the UK regulator had not gone far enough. David Herbinet, a Mazars partner, said: “We have just been through our worst financial crisis for generations and there is public expectation that robust audit reform will be high on the agenda".

The Competition Commission argued that the package of remedies it unveiled on Monday would make the audit market less sluggish without needlessly encumbering companies.

Full article (FT subscription required)

Competition Commission press release

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