The Investment Association has responded to the Competition and Markets Authority consultation on the Statutory Audit Market, highlighting that the lack of competition in the sector may hinder regulators and effectively make the industry ‘too big to fail.’
Liz Murrall, Director of Stewardship and Reporting at The Investment Association, said:
“Investors rely on the quality and robustness of audits when making investment decisions and holding company management to account. While examples of audit failure are relatively rare, they have serious implications when they do occur. Recent Audit Quality Reports suggest there is a worrying decline in quality and that trend is of concern to investors who rely on high-quality audit as a key plank of theinvestment and stewardship processes.
“We also remain concerned at the lack of real choice in the audit market. Too often audit committees appear reticent to appoint a firm that is not one of the ‘Big Four’. In order to address the current levels of market concentration, auditors outside the Big Four need to scale up to meet the needs of the market. In return, companies should be inviting a range of firms to tender and investors would expect that only the large multinationals should be restricting their choice to the Big Four.
“There is a serious risk with such a small pool of auditors dominating the market that regulators feel unable to impose significant sanctions without risking driving one of the key players out altogether. The prospect of the Big Four becoming the Big Three risks making the audit sector too big to fail.”
For further information, please contact:
Ben Rathe, Senior Communications Manager: firstname.lastname@example.org
T +44 20 7269 4655
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