The Institute of Chartered Secretaries and Administrators has entered the debate regarding the dominance of the Big Four accounting firms in the UK audit market as it voices support for a wider availability of choice.
In response to a discussion paper issued by the Financial Reporting Council entitled Choice in the UK Audit Market, the ICSA has stated the emphasis should be about ensuring that a wide enough net of services is available to prevent a cartel being allowed to form.
The Big Four PwC, KPMG, Deloitte and Ernst & Young currently audit 97 percent of the FTSE 250 and all but one of the companies in the FTSE 100.
The ICSA says in order to encourage more competition in the audit market, it is recommending that the FRC pushes smaller firms to enhance their services.
It also recommends that a second tier of firms acting as joint auditors or forming liability partnerships to provide an alternative to those companies seeking a wider range of audit services.
Whilst non-executive directors are understandably cautious, tending towards the larger firms with the higher profile reputations, the ICSA suggests that audit committee chairmen and finance directors need to be made more aware of what the smaller firms have to offer.
An ICSA spokesperson says: “In the event that one of the Big Four firms collapses, the FRC should consider laying emergency plans. This would involve the Big Four signing a Memorandum of Understanding that they would hold back on recruiting the staff and clients to prevent a monopoly on their acquisition. Provided they had been encouraged by the FRC, we believe that the second tier of firms would be in a good position to take on the staff and clients of the collapsed partner.”