As the Big Four firms continue to dominate audit, have government efforts so far to reform the market failed?
David Herbinet, global head of audit at Mazars, says YES.
The Financial Reporting Council’s latest figures show that, despite all efforts, the audit market is actually narrowing.
A diverse market is vital for audit quality and for the overall functioning of the economy – as our research shows that fewer than one in five members of the public trust the UK’s audit system.
It’s clear that relying upon voluntary concessions from the largest firms to increase participation, choice and resilience in the market will not produce results. The good news is that, following a thorough and independent review, the Competition and Markets Authority (CMA) has tabled a highly credible range of measures designed to address these very problems. It now remains only for the government to legislate the recommended regulation.
The CMA’s package, including mandatory joint audits in the FTSE 350, will create a genuinely competitive audit market that addresses the needs of society. This represents the clearest opportunity in decades for real change, and it’s now time to maintain momentum.
Michael Izza, chief executive of ICAEW, says NO.
It’s little surprise to see that all FTSE 100 companies are audited by one of the Big Four. We agree that the audit market needs to change, and that’s why we’ve been engaging in the reviews of the sector which have taken place since the collapse of Carillion.
Taking action to restore public concerns around audit is a vital part of maintaining confidence in business. Progress is being made, but there are no easy solutions to the problems which have been identified, as demonstrated by the need to further consult on the Competition and Markets Authority’s proposals.
Sir Donald Brydon’s review of audit is now entering its final stage; any reforms must build on all the reviews of the sector and the momentum for change which exists.
Reform is underway, but is by its very nature complex, and therefore will take time to get right. It now seems likely that there’s going to be a General Election soon: our plea to any government is to finish audit reform, by implementing the reviews and restoring public trust in the sector.
Main image credit: Getty