James Roberts, Senior Audit Partner, BDO LLP comments:
We are pleased that the Competition Commission has today confirmed its findings that the audit market is fundamentally flawed and has largely confirmed the provisional decision on remedies it published in July.
The final report does not, of course, reflect the five year tendering proposals in the provisional remedies, instead opting for a maximum ten-year period. But, while some may regard the outcome of the Investigation as being less radical than many would have hoped, the real importance of the Investigation has been to shine a spotlight on a previously dark recess of corporate governance. That’s the real victory here.
The Investigation has led to a much broader debate around the role of the auditor and corporate reporting, which is welcome. But it has also fundamentally altered the view of the market as to what good governance means when it comes to the appointment of auditors. It is this essential shift in attitudes to governance, to reject the notion that an auditor can remain in place for 100 years without a competitive tender, which should bring about real change in the market and encourage genuine and fair competition; more than the changes in the rules which the Competition Commission will impose. Through doing this, it will help encourage innovation and better increased competition, which will drive an improvement in audit quality.
At BDO, we have long campaigned for the changes that the Competition Commission seeks to encourage. The larger company audit market has long been characterised by a lack of choice and by restrictions on competition, which potentially undermine the long term viability of UK capital markets.
BDO welcomes the opportunities that these audit market reforms will bring over the coming years, but we are under no illusion that, despite the Investigation, the establishment of real and sufficient competition is a long-term undertaking.