Audits shake-up 'cave in'

Regulators have "caved in" to pressure to withdraw their most hard-hitting reform of the listed audit market, mid-tier accountants argued today following the end of a two-year probe into the sector.

The Competition Commission had wanted FTSE 350 firms to put the audit role out to tender every five years to smash the dominance of the Big Four accountants. KPMG, PricewaterhouseCoopers, Deloitte and EY run the numbers on more than 90% of FTSE 350 firms, with one-third of the top 100 companies employing the same accountant for more than 20 years.

Inquiry chairwoman Laura Carstensen believed such long-running relationships were detrimental to shareholders. But in a final report today she responded to criticisms of the cost and usefulness of such regular tendering — even on a comply or explain basis — by instead making it mandatory for audits to be put out to competition every 10 years.

James Roberts, senior audit partner at BDO, one of the mid-tier accountants hoping to win more work as the result of the inquiry’s reforms, said: “Clearly this is a bit of a cave-in. The victory in this, though, is that the inquiry has opened up people’s eyes a bit [about the need to look at audits more carefully].”

Carstensen said the change had “nothing to do with pressure” and said she still believed tendering every five years would be “of benefit” for many firms, although shareholders’ responses were “notable for not supporting its effectiveness”.