Julie Matheson, regulatory partner accounting services at law firm Kingsley Napley LLP, examines the government’s audit reform proposals, asking whether this is a golden opportunity for mid-tier audit firms or a poisoned chalice?
Conversations on audit quality often focus on the Big Four – PwC, Deloitte, EY and KPMG, perhaps not unsurprisingly, given that they dominate the FTSE 350 market, in carrying out a reported 97% of the audits of companies falling within that listing.
Whilst mid-tier firms do operate in the public interest entity (PIE) market, their share of the more lucrative FTSE market is exceptionally small. Indeed, only 30 firms in total are reported to audit PIEs of any size. This could be partly down to choice, in that audit firms may wish to avoid the additional level of regulation that comes with operating in the PIE arena. It could also be due to market forces, because the monopoly at the top of the market is stifling competition. Is this all set to change due to the recently announced BEIS government consultation paper on audit reform?
