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The two banks, which both had to be propped up by the UK government during the financial crisis, have told the Competition Commission that it was wrong to consider forcing companies to change their audit firm periodically. The competition watchdog pointed out that audit firms sometimes vetted the same company for decades and criticised auditors for neglecting investors by focusing too much on company executives.
In its formal response to the proposed reforms, Lloyds favoured the softer approach taken by the lead accounting regulator, the FRC, which encourages companies to re-tender their audit contract at least once a decade. Lloyds, which is audited by PwC, said it would be “counter-productive” to prevent a company from keeping its audit firm if a tender process had confirmed it as the best option.
RBS, which has been audited by Deloitte since 2000, also backed the FRC approach, saying that mandatory rotation would simply lead to the passing of its audit contract between the biggest firms, rather than ushering in extra competition.
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