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| Audit market competition plans unveiled | Audit market competition plans unveiled |
| (35 minutes later) | |
| Major UK-listed companies must allow accountancy firms to bid for their audit work every five years, the Competition Commission has proposed. | Major UK-listed companies must allow accountancy firms to bid for their audit work every five years, the Competition Commission has proposed. |
| It said that putting the work out to tender regularly would help to break up the dominance of the big four accountancy firms. | It said that putting the work out to tender regularly would help to break up the dominance of the big four accountancy firms. |
| The commission stopped short of forcing companies to change auditors. | The commission stopped short of forcing companies to change auditors. |
| KPMG, Deloitte, PwC and Ernst & Young audit 90% of the UK's largest stock market-listed companies. | KPMG, Deloitte, PwC and Ernst & Young audit 90% of the UK's largest stock market-listed companies. |
| The regulator is concerned that they are too dominant and do not always meet shareholders' needs. | The regulator is concerned that they are too dominant and do not always meet shareholders' needs. |
| "More frequent tendering will ensure that companies make regular and well informed assessments of whether their incumbent auditor is competitive and will open up more opportunities for other firms to compete," said Laura Carstensen, chairman of the Audit Mark Investigation Group. | "More frequent tendering will ensure that companies make regular and well informed assessments of whether their incumbent auditor is competitive and will open up more opportunities for other firms to compete," said Laura Carstensen, chairman of the Audit Mark Investigation Group. |
| "A more dynamic, contestable market will reduce the dangers that come with overfamiliarity and long, unchallenged tenures," she added. | "A more dynamic, contestable market will reduce the dangers that come with overfamiliarity and long, unchallenged tenures," she added. |
| "Whilst there are costs in going out to tender, we think that they are outweighed by the benefits of a more competitive market in which shareholders can have increased trust." | "Whilst there are costs in going out to tender, we think that they are outweighed by the benefits of a more competitive market in which shareholders can have increased trust." |
| The report is part of a continuing investigation into the audit market. The plans will be put out to public consultation with final recommendations issued later in the year. | The report is part of a continuing investigation into the audit market. The plans will be put out to public consultation with final recommendations issued later in the year. |
| Boosting competition | |
| The industry was heavily criticised during the financial crisis for not doing enough to warn about company balance sheets and not scrutinising banks' books in enough detail. | |
| "We gave careful consideration to other measures, including mandatory switching, but we think that the measures that we have provisionally chosen will be the most effective and proportionate way to address the problems we have found," said Ms Carstensen. | "We gave careful consideration to other measures, including mandatory switching, but we think that the measures that we have provisionally chosen will be the most effective and proportionate way to address the problems we have found," said Ms Carstensen. |
| "We do not see a competition problem with audit firms retaining business if they do a good job - but they will have to demonstrate this on a regular basis." | "We do not see a competition problem with audit firms retaining business if they do a good job - but they will have to demonstrate this on a regular basis." |
| The Competition Commission proposed that in exceptional circumstances, the companies listed on the FTSE 350 index could put audit work out to tender every seven years. Companies would be banned from allowing just the big four to apply, allowing more competition. | |
| Ms Carstensen told BBC Radio 4's Today programme that there was evidence to show that when companies put their audit work out to tender, competition was fierce. She said that the proposed remedies would also prevent auditors from catering too much to management instead of shareholders. | |
| The watchdog also wants the powers of the Financial Reporting Committee, the industry regulator, boosted by requiring it to review every audit engagement at the top 350 companies roughly every five years. | |
| In addition, shareholders will have to vote on whether a company's annual reports contains sufficient information. | |
| There would be a transitional period of five years for these measures to come into effect. |