By Daniel Hunter
The Competition Commission (CC) has today (Tuesday) published changes that will open up the UK audit market to greater competition and ensure that audits better serve the needs of shareholders in future.
Under the new rules major UK-listed companies must allow accountancy firms to bid for their audit work every 10 years. This is double the five-year limit proposed by the Commission in July.
Firms will also no longer be permitted to limit those who bid for its audit work to just the big four accountancy firms.
The watchdog has also boosted the powers of the Financial Reporting Committee, the industry regulator, by requiring it to review every audit engagement at FTSE 350 companies on average every five years.
"Our measures will deliver lasting change in a market where currently a major company putting its audit out to tender remains unusual enough to be a news story," Laura Carstensen, Chairman of the Audit Market Investigation Group, said.
"Instead, all this business will be open to competition on a regular basis. The introduction of regular and predictable tenders will benefit shareholders, who will also have a much greater say and knowledge of whether their needs as customers are being met.
"Instead of long unchallenged tenures which can reduce the appearance of objectivity and scepticism essential to an effective audit, there will now be far greater transparency and scrutiny.
"It will also open the door to other auditors who now have the chance to compete regularly for business and show they’re up to the mark. This will help them prepare for and counter any perceived lack of experience, resources and reputation which may have hindered them from winning FTSE 350 audit engagements in the past. In effect they will more frequently be able to compete on a level playing field."
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