The Office of Fair Trading has referred the market for the supply of statutory audit services to large companies in the UK to the Competition Commission for further investigation.
The decision follows a pubic consultation which closed in September. The OFT is concerned the audit market is highly concentrated, with low levels of switching and substantial barriers to entry.
In 2010, the four largest firms – PwC, KPMG, Deloitte and Ernst & Young – earned 99 per cent of audit fees paid by FTSE 100 companies. Between 2002 and 2010, the average annual switching rate among FTSE 100 companies was only 2.3 per cent.
OFT chief executive John Fingleton says: “The market for large company audits lacks sufficient competition and does not work well for customers. It is highly concentrated, largely supplied by four big firms, with clients rarely switching between auditors. There are also high barriers to entry for new and smaller competitors. These are not the indicators of a competitive market.”