Reports suggest this morning that the Big Four audit firms have been asked to investigate ways of increasing the choice of auditors for companies listed in the UK.
There has been pressure on the UK audit market since the collapse of the construction giant Carillion, and criticism not just of the company’s auditors—KPMG—but also of the audit regulator, the Financial Reporting Council.
The Times reports that the head of the Competition and Markets Authority has held a series of meetings with the leaders of the Big Four—PwC, Deloitte, EY and KPMG—to suggest that the firms look at ways to change the current environment in which the four dominate the market for large audits.
The Times says the move demonstrates a “reluctance” to investigate the market with a view to splitting audit arms from the rest of the services offered by the firms.
Last week KPMG’s UK chief, Bill Michael, said that the Big Four were losing public trust and that change was needed.
However, he said it was not the right time to split audit from advisory services because it would be like “trying to create Frankenstein’s monster.”
It has also been reported that the government is looking for someone to lead a review of the audit market.
In May, Paul Boyle, a former chief executive of the FRC, wrote for Board Agenda that the ownership model for audit firms needed reform. The rule demands that only qualified auditors can own an audit firm.
“We should eliminate the current audit firm ownership rule but require firms that are funded by non-auditors to implement additional safeguards against improper influence,” Boyle said.
“These could include limiting the percentage that any individual investor might own, requiring a board consisting of a majority of independent directors to state publicly that the procedures to safeguard audit independence have operated effectively.
“And of course externally funded audit firms would be subject to the same standards and inspections as existing firms.”