The Financial Reporting Council (FRC) has signalled its opposition to the Competition Commission's (CC) proposals for five yearly audit re-tendering, claiming it would be disproportionately costly and would fail to increase competition.

In its response to the CC's consultation on potential remedies for the statutory audit market, the FRC says there is a risk that tendering at five yearly intervals would result in a 'sham process' as it would not be taken seriously by companies or firms.

The FRC changed its corporate governance code in October 2012 to introduce the 10-year comply or explain process to force companies to review their audit. This is twice the CC's recommended proposals.

FRC CEO Stephen Haddrill said: 'In particular, we are concerned that tendering on a five year basis will involve additional costs and risks to companies and firms.'

The body said that while it supports the CC proposals to make more information available on audit quality on firms auditing public interest entities, it has expressed concern over plans to extend the Audit Quality Review (AQR) reporting to all FTSE 350 companies every five years. It is also sceptical about the remit to include firms auditing 10 or more public interest entities, fearing it could undermine the FRC's current risk-based approach to the selection of audits for inspection.

With nine firms currently auditing more than 10 public interest entities, the FRC expressed support for producing annual reports on BDO and Grant Thornton, as both have FTSE 350 clients and audit sufficient other public interest entities to allow for a reasonable sampling. For the smallest players - Baker Tilly, Mazars and Crowe Clark Whitehill - it proposed expanding its current option of 'thematic inspections'.

The regulator indicated it would be prepared to consider amendments to the Corporate Governance Code to encourage greater shareholder engagement with companies on audit issues, as recommended by the CC.

The CC consultation on the proposed remedies for the statutory audit market closes today, and its final report is expected by 20 October 2013.

At the same, time the European Commission(EC)is reviewing the audit market and is due to issue its recommendations this autumn. EU-level rules would automatically overrule any UK statutory requirement.