FRC says no to five year audit tenders

FRC says no to five year audit tenders

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The FRC's opposition to last week's Competition Commission decision to force FTSE-350 companies to put their audit out to tender every five years at least has come up against criticism from smaller accountancy firms, the Telegraph reports.

The Kreston International group of smaller accountants are quoted as saying the proposals would reinforce the dominance of the Big Four and there are concerns that it will not increase audit choice or open the market.

What do you think about the FRC's opposition? Will it make life easier for the Big Four or can you actually see them working?

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By DMGbus
20th Aug 2013 09:00

Profit levels (per partner) indicator of competition level

To form a view on whether there is adequate competition in a market sector - in this case big four auditing listed companies - then I believe that profit levels on a £ per partner of the big four audit firms (as compared to smaller firms) basis could be indicative of whether PLCs are getting value for money.

As the FRC quite correctly stated there is a danger of some audit firms getting too close to the management of their clients - I see a risk of auditors in such circumstances acting for management rather than for shareholders.  In this context I have seen reports that a big four auditor rubbished a bank's whistleblower who had exposed / complained about reckless lending within the bank - and it is a good question as to whether the big four auditor was working for the management (too pally with management) or the shareholders (being independent auditors) in this circumstance.  I have also had concerns in the past that at least one of the big four auditor might have been effectively "selling it's signature" to management in some circumstances - producing reports to vindicate bad management within an audit client.

It is unfortunate that mergers of large audit firms have been allowed to take place in recent decades - effectively reducing competition in the PLC audit market, and I would suggest, may have resulted in higher profits per partner.

 

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By The Black Knight
20th Aug 2013 12:52

tender to the shareholders

AGM appointment/ reappointment with four tenders enclosed for voting on two big four and two mid tier proposals?

or will it be cheapest quote wins?

Would an adverse report mean you were sacked the following year because of the effect on the share price?

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