UK audit industry faces competition investigation
After much discussion, consumer watchdog, The Office of Fair Trading, has decided to call for an independent inquiry into the audit industry following criticism of the actions of four of Britain’s largest accountancy firms.
The OFT started to examine the industry after allegations of poor quality published accounts and conflicts of interest against Deloitte, KPMG, Ernst & Young and Price Waterhouse Coopers, surfaced in a House of Lords Committee report last year.
The committee had also said the failure of the auditors to communicate regularly with regulators ahead of the banking crash of 2008 / 2009 amounted to what they described as a "dereliction of duty."
The OFT added it had been concerned for some time that the audit market was highly concentrated with substantial barriers to entry and switching.
Since May, the OFT has been holding talks with interested groups in a bid to identify possible remedies but has now decided that a Competition Commission inquiry is the best way to provide what they said was an "appropriate response to our long-standing competition concerns in this market."
The decision, which is yet to be officially confirmed, will be formally taken following a six-week consultation period.
Deloitte said they would welcome measures to increase competition while KPMG said it believed that there was already effective competition and pricing in the UK audit market. Ernst & Young have confirmed that they will co-operate with the inquiry and Price Waterhouse Cooper, that they will respond after reading, in more detail, the OFT’s provisional decision to hold an inquiry.
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