Lords query lack of audit competition

THE House of Lords’ Economic Affairs Committee will today question industry representatives on whether lack of competition among auditors could have contributed to the financial crisis.

Representatives from RSM Tenon, Grant Thornton, Mazars and BDO will face questions in the afternoon on whether the dominance of the “big four” auditing firms – Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young – negatively effects the quality of auditing for major firms.

RSM Tenon’s Russell McBurnie will tell committee members that only a few auditors are capable of handling the accounts of large multinationals. But in addition, he claims “there is a perception barrier” whereby companies and lenders view the main four firms as a safe bet.

He will also suggest that audit committees should be more transparent in declaring why they have chosen a particular firm.

BDO senior audit partner James Roberts, who wrote his firm’s evidence submission to the committee, says that audit committees should be required to consult major investors over their choice of auditor.

“Ultimately, it’s audit committees that appoint the auditors, but the auditors report to shareholders,” he says. “So there’s a slight mismatch in the way things work.”