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| Competition Commission raps Big Four accountants | Competition Commission raps Big Four accountants |
| (35 minutes later) | |
| Britain's four biggest accountancy firms have been heavily criticised by the Competition Commission. | Britain's four biggest accountancy firms have been heavily criticised by the Competition Commission. |
| href="http://www.competition-commission.org.uk/media-centre/latest-news/2013/Feb/audit-market-not-serving-shareholders" >The regulator has accused PWC, Ernst & Young, Deloitte and KPMG of being too dominant and enjoying too cosy a relationship with company management. | |
| The four accountancy firms act as auditors for 90% of the UK's stock-market listed big companies. | The four accountancy firms act as auditors for 90% of the UK's stock-market listed big companies. |
| They have also been criticised in the past for not doing enough to warn of the financial crisis. | They have also been criticised in the past for not doing enough to warn of the financial crisis. |
| The Competition Commission also found that companies do not tend to change their auditors - with almost a third of the FTSE 100 having used the same one for more than 20 years. | The Competition Commission also found that companies do not tend to change their auditors - with almost a third of the FTSE 100 having used the same one for more than 20 years. |
| The concern is that the relationship between the two becomes too comfortable with a "tendency for auditors to focus on satisfying management rather than shareholders' needs". | The concern is that the relationship between the two becomes too comfortable with a "tendency for auditors to focus on satisfying management rather than shareholders' needs". |
| Laura Carstensen, chair of the Audit Investigation Group, said: "We have found that there can be benefits to companies and their shareholders from switching auditors, but too often, senior management at large companies are inclined to stock with what they know." | Laura Carstensen, chair of the Audit Investigation Group, said: "We have found that there can be benefits to companies and their shareholders from switching auditors, but too often, senior management at large companies are inclined to stock with what they know." |
| 'Significant flaws' | |
| She said her organisation was looking into different ways of encouraging competition in the industry. Mandatory rotation of audit firms is one idea being considered, as well as forcing companies to put the contract out to tender after a certain period. | |
| The Big Four argue that the market is competitive and say many big clients doubt that smaller firms could build up their expertise fast enough. | |
| "We are very clear that we report to the shareholders and engage with the Audit Committee as their representatives," said PWC's Richard Sexton. | |
| "We believe that the Competition Commission have grossly underestimated the critical role that Audit Committees play in protecting the interests of shareholders." | |
| In a statement, BDO, one of the smaller rivals to the Big Four, said it was pleased that the Competition Commission had confirmed "significant flaws" in the market. | In a statement, BDO, one of the smaller rivals to the Big Four, said it was pleased that the Competition Commission had confirmed "significant flaws" in the market. |
| "No one solution will achieve market correction, but rather a combination of tendering requirements, encouragement of transparency and dialogue between auditors, companies and investors, and reform of outdated exclusionary practices should provide a backdrop for a healthier FTSE 350 audit market," said Simon Michaels, managing partner at BDO. | "No one solution will achieve market correction, but rather a combination of tendering requirements, encouragement of transparency and dialogue between auditors, companies and investors, and reform of outdated exclusionary practices should provide a backdrop for a healthier FTSE 350 audit market," said Simon Michaels, managing partner at BDO. |
| The report is a preliminary one, with the final version due to be published in October. |