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Tag: oligopolies

Brits To Give Big 4 the Full Monty

Britain’s top accountants are to have their own books scrutinised after the consumer watchdog referred the business of checking companies’ figures for a full-scale competition inquiry. The Office of Fair Trading (OFT) said it had been concerned for some time that the audit market is highly concentrated with low levels of switching and substantial barriers to entry. The watchdog estimates that in 2010 the “big four” firms, PwC, KPMG, Deloitte and Ernst & Young, earned 99% of audit fees paid by FTSE 100 companies, while between 2002 and 2010 only 2.3% of FTSE 100 firms changed their auditor. [UKPA]

Are the Brits Getting Serious About a Big 4 Antitrust Probe?

Now that everyone (well, not everyone) has fully recovered from Royal Wedding 2011, it’s time to get to the bottom of this.

A U.K. House of Lords committee investigating the financial crisis said in a March report that the firms, which audit 99 of the 100 largest U.K. companies, should be probed by the London- based Office of Fair Trading to determine whether their market dominance wrongfully limits choice. The probe could be the most high-profile for the agency since it investigated banks’ equity underwriting practices — an inquiry that closed without any action being taken.

The OFT would help determine whether loan terms unfairly favor Deloitte LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP, said Robert Bell, an antitrust lawyer in London with Speechly Bircham. The agency, which has kept the industry under review since 2002, will make a decision on the probe later this month, said spokeswoman Kasia Reardon.

‘Big Four’ Audit Firms May Face U.K. Antitrust Investigation This Month [Bloomberg]

Some People Take Exception with the Idea That Investors Don’t Care About the Lack of Audit Firms

That said, it’s not as if investors can be everywhere at once. Audit committees could stand to get better at sharing information.

Liz Murrall, director of corporate governance and reporting at the Investment Management Association, strongly refutes this claim. “Investors do care”, she insisted, saying “no one wants to see an auditor in place for 50 years”.

However, Murrall warned that investors cannot engage with every company, and therefore cannot be expected to watch over audit committees’ shoulders to check every appointment. “Shareholders want the option of being involved, but don’t want consultation to be mandated – they don’t always have the time or resources.”

Transparency is the order of the day, according to the IMA. If audit committees increased disclosure about the tender process, shareholders would be more motivated and able to engage, boosting choice and competition in the market.

Investors ‘do care’ about audit competition [Accountancy Age]