UK watchdog to focus on competition in company audits

Carillion

14/12/2023 10:13

By Huw Jones
       LONDON, Dec 14 (Reuters) - Britain's accounting watchdog
said on Thursday it would focus on studying competition next
year as KPMG, EY, Deloitte and PwC - dubbed the world's Big Four
- continue to dominate auditing of big UK companies, limiting
choice in the market.
    The Financial Reporting Council (FRC) said a key area of
policy work in 2024 would be market studies, even thought it has
yet to obtain powers like the UK Competition and Markets
Authority to force through remedies.
    Market studies would help drive improvements in the audit
market, the FRC said.
    "These will enable us to explore issues relating to the
audit market in more detail, generating richer information about
these matters and potential proposals for action if we identify
concerns," the FRC said in its annual "snapshot" of the audit
market.
    After accounting scandals at builder Carillion, retailer BHS
and elsewhere, three government-commissioned reviews recommended
root-and-branch reform of auditing, including a new, more
powerful watchdog - by effectively rebadging the FRC - but
legislation has yet to be brought forward.
    The FRC said that commencing market studies now would help
develop capabilities once they were in place.
    So-called challenger audit firms, the next tier down from
the Big Four, have seen a small increase in market share, but
the audit market remains highly concentrated, the FRC said.
    "The Big Four accounting firms continue to dominate, earning
98% of FTSE 350 audit fees in 2022, resulting in limited choices
for businesses and ongoing concerns about resilience," the
watchdog said.
    Audit fees increased between 2021 and 2022 for mandatory
company audits by 8% to 1.1 billion pounds.
    Some FTSE 350 companies switched from a Big Four audit firm
to a challenger, but the proportion of FTSE 350 companies making
such a switch was lower in 2022 than in 2021, the FRC said.
    
   

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FRC Graphic on 2022 Audits    https://tmsnrt.rs/41p4MLC
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 (Reporting by Huw Jones
Editing by Mark Potter)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))