OFT looks for audit change

UK regulators believe the market for auditing services is anti-competitive enough to warrant a full investigation and are looking for ways to improve it, the Office of Fair Trading (OFT) said yesterday.

An OFT investigation and a high-profile House of Lords inquiry has concluded that the Big Four auditors – PriceWaterhouseCoopers, KPMG, Ernst & Young and Deloitte – hold too much of a stranglehold and prevent smaller firms from competing.

FTSE 100 companies change their auditor on average once every 48 years and 99 per cent of them uses one of the Big Four.

“We believe that the statutory test for a Competition Commission reference has been met, but are keen to understand more about the remedies available in the market,” said OFT executive director Clive Maxwell.

James Roberts, a senior audit partner at BDO, said more shareholder involvement in choosing auditors would encourage more suppliers, as well as allowing audit firms to raise capital for growth – as listed firm RSM Tenon has done – and protecting small firms from risk of litigation.

The OFT will consult in May and June and decide whether to refer the case to the Competition Commission later in the year.