Britain’s competition watchdog has ditched its more radical ideas for shaking up an accounting market dominated by the “Big Four” audit firms, leaving it to the European Union to take tougher action.
Auditors are under pressure to change how they operate after giving banks a clean bill of health just a few months before several lenders had to be rescued by UK taxpayers in the financial crisis.
Britain's Competition Commission this morning set out the changes it plans to introduce in an accounting market dominated by Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young, with the principal change being a requirement for companies to put their audit work out to tender every five years.
The Commission wants to stop “over familiarity” as some of the Big Four, who were unable to comment immediately, have served the same customers for decades.
Smaller players like Mazars, BDO and Grant Thorton find it costly to hire more accountants without some intervention to give them a better chance of picking up more work. “The remedy package includes measures to improve the bargaining power of companies and encourage rivalry between audit firms,” the watchdog said in a statement.
Britain’s top 350 listed companies could defer putting out their accounting work to tender by a further two years in exceptional circumstances, it added, and the change would be phased in over five years.
It marks a hardening of a new rule introduced by the sector's regulator, the Financial Reporting Council (FRC), which has asked companies to consider once every decade putting their audit work out to tender.
BDO said the package will accelerate much needed change but there was unlikely to be “liquidity” in the market if the same small number of accountants are invited to tender.
However, there will be relief that the competition body has decided against forcing companies to actually switch auditor on a regular basis or require two auditors to check the books of a company.
The watchdog has also decided against imposing more curbs on the type of advisory work an accountant can offer a company whose books it already checks.
Reuters
