Accountancy firms have given a largely positive welcome to the Competition Commission's (CC's) proposed remedies to encourage greater competition in the audit market, but have challenged its proposal for five-yearly re-tendering rather than the Financial Reporting Council (FRC) 10-year rule.

James Chalmers, head of assurance at PwC, said: 'The proposed halving of the retendering period from the Financial Reporting Council's recently introduced 10-year regime to five years is a significant change which will have a major impact on UK companies. It will be critical to get the transition right in order to manage the cost for businesses and potential market disruption.'

Simon Collins, UK chairman of KPMG, went further, saying that the switch to mandating FTSE 350 companies to tender their audits every five years undermined the fundamental 'comply or explain' principle of UK corporate governance. He disputed the CC's calculation that the costs of the move will be around £30m, saying there would be substantial incremental costs as well as a 'highly disruptive effect' on business.

Tony Cates, UK head of audit at KPMG, said : 'Five year audit tendering will feel relentless to many companies, audit committees and investors who may only see audit quality damaged rather than improved, with the possible end result that the process of tendering becoming an empty box-ticking exercise, rather than a more meaningful, engaged exercise on a ten year basis.'

This view was echoed by Hywel Ball, managing partner assurance, UK & Ireland, at EY, who said: 'We've yet to see any compelling evidence from the CC to support this change. It is not in the public interest and will likely only serve to increase the financial burden on companies at a time of ongoing economic uncertainty.'

Ball said the CC's findings showed 'competition between audit firms is healthy and robust'. He also welcomed the announcement that the CC measures do not include limiting the provision of non-audit services or joint audits and said that 'over a decade of debate on whether or not mandatory rotation contributes to audit quality and increases competition has, for now, been laid to rest.'

James Roberts, senior audit partner at BDO LLP, said mandatory rotation was now a 'superfluous remedy' given the frequency of mandatory retendering which the CC is proposing, but warned 'we're unlikely to see genuine liquidity in the market if the same small number of firms are invited to tender.'

'More clarity is still required on tendering practice. We would have welcomed proposals to facilitate a more transparent tender process, drawing on the best features of procurement practice,' Roberts said.

David Herbinet, partner at Mazars, said further action was still needed to create a level playing field for new entrants into the FTSE 350 market, and that the CC will have to take into account changes in audit requirements at the EU level.

'A little more competition between existing dominant players will not be enough. But we take heart that the genie can't be put back in the bottle - the problems with the current structure have again today been laid out for all to see,' Herbinet said.