I am currently Expert Advisor to the UK Government's Competition and Markets Authority and their Review of the Audit Market. The experience has been fascinating.
The review has been set up to address concerns that the Big Four's oligopolistic position has undermined audit quality.
The CMA's proposed changes have just been published.
Proposals include the full operational separation of audit and advisory services, including separate management, accounts, and remuneration of partners in audit and advisory practices. The report states that "auditors’ focus on quality appears diluted by the fact that at least 75% of the revenue of the Big Four comes from other services like consulting."
The report also recommends that audits of the UK’s biggest companies (FTSE 350) should be carried out by at least two firms, at least one of which should
be from outside the Big Four. "This will give mid-tier firms access to the largest clients, allowing them to develop their experience and credibility,
while also ensuring a cross-check on quality."
The CMA is now putting these proposals out for public consultation.
We live in disruptive times.
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