Top British firms to be made put auditing work out to tender

Monday 22 July 2013 08.34
The new rules are aimed at addressing the dominance of the 'big four' accountancy firms
The new rules are aimed at addressing the dominance of the 'big four' accountancy firms

Britain's top companies will have to put their book-keeping work out to tender every five years to increase choice and ensure audit quality, the country's competition watchdog said.

The Competition Commission has set out the changes it plans to introduce in an accounting market dominated by the so-called "Big Four" players: Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young.

"The remedy package includes measures to improve the bargaining power of companies and encourage rivalry between audit firms," the watchdog said in a statement.

Britain's top 350 listed companies could defer putting out their accounting work to tender by a further two years in exceptional circumstances, it added.

There will be a transitional period of five years before the measure comes into full effect.

The move marks a hardening of a new rule introduced by the sector's regulator, the Financial Reporting Council, which has asked companies to consider once a decade putting book-keeping out to tender.

The Big Four, however, will be relieved the competition body has decided against forcing companies to actually switch auditor on a regular basis or require two auditors to check the books of a company.

The watchdog has also decided against imposing more curbs on the type of advisory work an accountant can offer a company whose books it already checks.

Instead, the FRC will get powers to boost competition and be required to review every audit engagement at the top 350 companies roughly every five years.

Shareholders will also have to vote annually on whether reports from the company's audit committee contain sufficient information.

The plans will be put out to public consultation before being published in final form in October for implementation.