Comments from ACCA to the Competition Commission, August 2011.
ACCA is pleased to respond to the Consultation Statutory audit on the Office of Fair Trading's (OFT) provisional decision to make a market investigation reference to the Competition Commission of the supply of statutory audit services to large companies in the UK. We believe that action is needed to increase competition and we support, therefore, the provisional decision to make a Market Investigation Reference to the Competition Commission.
As noted in the Consultation, the issue of concentration in the market for statutory audit services to large companies has been debated over the last decade both in the UK and internationally. ACCA, as a global body has provided evidence and views in relation to many of the initiatives in this regard. We attach a copy of our May 2011 position paper Audit under fire: a review of the post-financial crisis inquiries, which includes our views on mechanisms to increase audit competition.
In summary, we do not believe that it is appropriate to intervene in the market by downsizing or restructuring the Big Four, nor by artificial intervention into the market, such as putting 'caps' on the number of audits that any one firm can carry out. Companies must have a right to appoint auditors of their choice and the long-term answer must lie in persuading directors and investors that their best interests are served by a healthy competitive audit market.
It is also vital to reduce barriers to market entry and we highlight in particular the need for action on banks' restrictive covenants, which are directly anti-competitive, and to limit auditors' liability.