“The origins of the shake-up now facing the accountancy industry can be traced back to the collapse of Carillion at the start of this year.
Concerns about auditing in Britain had been quietly growing among politicians for some time, but they came to the fore after the demise of the government contractor.
An inquiry by MPs called the audit market a “cosy club” and criticised the Financial Reporting Council as “feeble and timid”. Nearly 12 months later, two inquiries have concluded that regulation of the sector and competition between firms must be improved.
Competition and Markets Authority study
The competition regulator announced in October that it would investigate the audit sector to examine concerns that it was “not working well for the economy or investors”. It said that this would include looking at whether the sector was competitive and resilient enough to maintain high standards.
Since then the Big Four have lobbied hard against a wholesale break-up of their firms. They were supported by their smaller rivals Grant Thornton and BDO, despite the fact that the measure would not belimposed on them.
The CMA has stopped short of recommending a break-up of the firms, proposing a ringfencing of audit activities instead, but it has not dropped the threat entirely. Will Hayter, the CMA director responsible for the audit market study, said: “The possibility of a full split of the Big Four should not be underplayed.” The CMA said that it would be “protracted and complex” and that an effective ringfence of audit was a more practical and quicker solution, but it has not ruled it out. …”
Source: Times, pay wall