For some time now, second-tier audit firms in the UK have been bent out of shape about the domination of the Big 4. And seeing how one of the Final Four Horsemen of the accounting apocalypse is auditing 99 out of 100 FTSE companies (and 240 of the FTSE 250), they may have a legitimate beef. On other hand, if you're a Big 4 audit firm, you must combat this narrative in some way and what better way to do that than with the weapon that accountants know best – numbers!
In a submission to the Competition Commission, which is due to release preliminary findings of its investigation into the audit market in November, PwC's lawyers Norton Rose said there were more than 130 instances of FTSE 350 companies switching auditor between 2001 and 2011. PwC said the data, which represents a rate of approximately one switch a month, dispels the widely held view that the audit market is static and uncompetitive.
The data shows that auditors outside of the largest auditors only sign off on the accounts of 13 companies within the FTSE 350 – the same number as in 2001. Over the same period, 11 FTSE 350 companies switched from mid-tier firms to Big Four firms, while only four FTSE 350 companies switched the other way. "PwC's suggests that on average a FTSE auditor remains in place for around 40 years with many in place for far longer – that hardly justifies the claim made by PwC of a "fiercely competitive market".
PwC competition research earns mid-tier backlash [Accountancy Age]