Britains top companies told they have to put their audits out to tender

12 August 2013 - Which Way To Pay

    



Competition Commission cracks down on Big Four’s audit dominance

Britain’s top companies are now told they will have to put their accounting business out to tender every five years to force accountancy firms to compete for the audit work.

The Big Four firms are thought to exercise too much influence in the market

The requirement for FTSE 350 companies to more regularly put their audits out to tender is one of the series of measures that the UK competition watchdog has put in place to encourage rivalry between firms. The so called Big Four firm – PwC, EY, KPMG and Deloitte – are thought to exercise too much influence in the market. The big four accountancy firms check 90% of the UK’s largest stock-market listed companies.

What measures are being put in place?

Measures include the exclusion of clauses in documents which would limit a company’s choice of auditor to the ‘big four’ firms. "This is a comprehensive set of measures that will ensure that shareholders are better served by a more competitive market for statutory audit which is more responsive to their requirements," said Laura Carstensen, chairman of the Audit Market Investigation Group. "More frequent tendering will ensure that companies make regular and well informed assessments of whether their incumbent auditor is competitive and will open up more opportunities for other firms to compete. A more dynamic, contestable market will reduce the dangers that come with over familiarity and long, unchallenged tenures."

Continuing investigation into the audit market

This report is part of a continuing investigation into the audit market. The plans are going to be put forward to public consultation with final recommendations issued later in the year. The European Union is also investigating the industry, proposing mandatory switching of auditors.

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