The Office of Fair Trading is considering referring the auditing market to the Competition Commission over concerns the dominance of the big four firms is undermining competition.
The OFT says its concerns about the market are sufficient to be referred to the Competition Commission but it is currently looking at whether the Commission is in a position to resolve them before asking it to take on the case.
OFT executive director Clive Maxwell says: “We have been concerned for sometime about the extent of competition in this market because there are only four main players and substantial barriers to entry and switching.”
PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young audited 99 of the the FTSE 100 companies in 2010, according to a recent report by the House of Lords economic affairs committee.
It added that on average those firms only change auditors once every 48 years.
The OFT says it will now consult on whether “appropriate remedies” are available to the Commission as well as on the benefits of operating in the UK on a unilateral basis compared to following an international approach.
A draft directive is expected from European Union internal market Commissioner Michel Barnier in November which could see the introduction of passporting for auditors operating across borders and a “two speed” set of rules, with a lighter touch for smaller firms to encourage them to grow.
BDO senior audit partner James Roberts says: “We have long maintained there is a lack of competition in this market, but we are confident there are a range of measures within the competition authorities powers which could much to remedy this.”
An Ernst & Young spokeswoman says: “We support increased choice in the audit market to enable audit committees to have a wider range of audit firms to choose from in meeting their audit needs.”