The chief executive of the UK’s accounting watchdog has asked ministers for the authority to enforce a cap on the number of large companies that any one accountancy firm can audit, in an attempt to break up the dominance of the Big Four firms.
Sir Jon Thompson went on to question the likelihood of the government making the necessary legislative changes to grant such powers to the Financial Reporting Council (FRC) though, during a virtual conference by the Chartered Accountants in England and Wales yesterday.
He said there was no single, or simple, solution to reform the audit industry and said the FRC had asked for the power to apply both market share caps and managed shared audits on accountancies in the UK.
The audit industry in the UK has come under increasing pressure for a significant overhaul following a series of high-profile accounting scandals involving the likes of Carillion and BHS.
The government conducted a 16-week consultation earlier this year over a number of audit reform proposals being considered, including forcing FTSE 350 clients of the Big Four accounting firms – PwC, Deloitte, KPMG and EY – to use mid-tier accountancies to audit their subsidiaries.
Applying market share caps on the Big Four accounting firms was also included in the proposals, as a way to introduce competition to a market dominated by the Big Four firms.
Market share caps were preferred by a number of accountancies, as the Big Four firms rejected the idea of shared audits and some mid-tier competitors were also unenthusiastic about the prospect.