Attempts to open up the audit market to wider competition and encourage mid-tier firms to tender for listed audits has not produced the expected results, warn Paul Brehony, partner and Kate Gee, counsel at Signature Litigation LLP
The government’s strategy to break the dominance of the Big Four audit firms at the upper end of the UK audit market is running into difficulty. However, mid-tier firms are also encountering regulatory challenges as they conduct increasingly complex audits in a more stringent regulatory environment.
In 2019, the Competition and Markets Authority (CMA) issued a landmark report on the UK’s audit market. It called for smaller ‘challenger auditors to shake up the market and end the dominance of the Big Four’ in the wake of the collapses of Carillion and BHS. The report presciently acknowledged that it would take time to build up the capacity of smaller firms to audit the largest corporations. At the time, the Big Four – PwC, KPMG, EY and Deloitte – audited 97% of FTSE 350 companies, collecting 99% of the total audit fees.
The CMA
