The debate over whether the set-up of the audit market is fit-for-purpose today, and importantly, tomorrow has reached an important crescendo. The UK’s Competition Commission has been investigating the issue and released its provisional findings into the statutory audit market in mid February.
BDO welcomes the Competition Commission’s provisional findings that there are significant flaws in the structure of the FTSE 350 audit market.
BDO has long been at the forefront of campaigning for change in this market, which has been characterised by a lack of choice for clients and investors and by restricted competition, potentially threatening the ability of audit to underpin the effectiveness of UK capital markets. The exposure of audit to the spotlight has led to increased questioning of its value as it now stands, particularly in the context of the financial crisis which originally drove events towards the Commission’s inquiry.
The Commission has identified a challenge to the audit profession in demonstrating that it is, and appears to be, independent from client management. This is a challenge BDO acknowledges and which requires careful thought prior to selection of remedies.
The Commission has until October of this year to finalise its report and, in particular, to select remedies to correct the market defects. The remedies selected by the Commission need to be effective and comprehensive. No one solution will achieve market correction, but rather a combination of tendering requirements, encouragement of transparency and dialogue between auditors, companies and investors, and reform of outdated exclusionary practices should provide a backdrop for a healthier FTSE 350 audit market. These remedies have all been identified by the Commission.
BDO believes such a market will value innovation, fundamental audit quality and exceptional service. This must be to the benefit of UK plc.
Nicola Lally, Head of External Communications, firstname.lastname@example.org