Professional bodies and the regulator for the sector have echoed concerns expressed by accountancy firms over the Competition Commission's proposal that FTSE 350 audits should be re-tendered every five years, in its report on provisional remedies for the audit market.
ICAEW chief executive Michael Izza described regular tendering as 'good business practice' but said there were questions over whether a five-year basis would increase the regulatory burden without providing greater competition and choice.
'It is therefore disappointing that the Commission has decided on more frequent tendering than that now required on a comply or explain basis by the Financial Reporting Council (FRC), which has not had a chance to embed yet,' Izza said.
ICAS director of technical policy James Barbour also raised concerns about the CC's proposal for the FRC's Audit Quality Review team to review every audit engagement in the FTSE 350 on average every five years.
Barbour said: 'This proposal has potential cost and resource implications for the FRC. How is this to be resourced?'
The FRC's own statement of response indicated the regulator has concerns over the costs of a number of the CC's proposed measures and says it need to undertake more detailed cost benefit analyses.
The statement said: 'We will consider the proposal to increase the volume of audit inspections and reporting carried out by the FRC, particularly in view of extensions to our inspection work being proposed at European level. We will also take into account the balance of costs to shareholders as well as any potential benefits and how this would impact our risk based approach.'
The FRC has already indicated its opposition to CC plans to give the FRC an objective to have due regard to competition, which were released as an additional remedy in June.
In a letter in response to the consultation on the CC's plans, FRC chief executive Stephen Haddrill questioned the usefulness of the FRC having such a secondary duty and said it would prove costly. In order to achieve a representative selection of audits, he calculated that the regulator would need to undertake nearly 200 inspections for the Big Four alone, six times the present number.
