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News - 19 February 2013

Audit monopoly recommendations due

According to press reports, the Competition Commission is poised to release its provisional findings into the Big Four's monopoly of the large company audit market

This publication follows a 16-month probe that was set in train by a critical report from the House of Lords economic affairs committee in 2011. Following the provisional findings, responses will be collected from public submissions and hearings over the summer, with the final deadline for deciding any statutory action set for October 2013.

Various parts of the press including Reuters and the Independent on Sunday, predict that the inquiry team led by lawyer Laura Carstensen will recommend some kind of mandatory rotation of auditors.

A revision to the Combined Code for corporate governance effective from last October already requires FTSE 350 companies to put their audit out to external tender every 10 years. However, one criticism raised ahead of the report was that the Big Four’s monopoly on listed company audits would be strengthened if mandatory rotation meant companies ended up moving their audits from one Big Four firm to another every few years.

Ahead of its interim report, the Competition Commission’s inquiry team has already published a mass of material on its website which sheds considerable light on practices of firms at the top end of the market, but does not give many clues as to which way the enquiry will go with its recommendations.

The majority of FTSE 350 companies surveyed did not consider their choice of auditor to be limited to the Big Four firms. But, Peter Ham, Audit Director of ABDS comments:
“A paper  published last October found further signs of inertia and potential conflicts including: Two-thirds (66%) of finance directors/chief financial officers surveyed had previously worked for one of the Big Four audit firms, as had around 60% of audit committee chairs.”

If you need any help and advice on internal and external audits and the benefits they can offer contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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