Data published yesterday by the audit watchdog showed that the Big Four accounting firms increased their market share of the UK audit market in 2018.
The lack of competition in the sector has come under the microscope following scandals such as the failures of outsourcer Carillion and department store BHS which both received clean bills of health from their auditors shortly before their collapse.
In a report in April, the Competition and Markets Authority (CMA) called for the splitting of the Big Four’s audit arms from their non-audit arms and the introduction of joint audits to boost competition in the sector.
The government has not yet brought forward any legislation to enact these reforms.
Business secretary Andrea Leadsom told parliament earlier this month that the government was waiting for the results of another report into the sector by Sir Donald Brydon before bringing forward any new legislation.
David Herbinet, head of audit at challenger accountancy firm Mazars, said the FRC data illustrated the need for market reform.
“The FRC’s latest figures reinforce the fact that there is insufficient choice and resilience in the listed audit market,” he said.
“We now need the government to implement the CMA’s thorough and independent recommendations. This represents the clearest opportunity in decades for real change, and it’s now time to maintain momentum”.
Separately, Ian Peters, chief executive of the Chartered Institute of Internal Auditors, has written to Leadsom to call for legislation on the reform of the FRC which is set to be replaced by a new body: the Audit, Reporting and Governance Authority (ARGA).
Peters called on the government to: “Ensure parliamentary time is found to pass the legislation required in the coming months.”
He warned the business secretary that, “Given recent corporate collapses (BHS, Carillion, Patisserie Valerie and Thomas Cook) we believe it is critical the government now takes urgent action to replace the FRC with ARGA.”
And said: “Such reform is vital in order to strengthen the UK’s corporate governance framework, in helping to identify and prevent future corporate collapses.”
EY, PwC, KPMG and Deloitte declined to comment.