The move comes despite the Chancellor’s recent assertion to the House of Lords economic affairs committee that any decision to start a competition investigation could only be taken by the Competition & Markets Authority (CMA), not the government, unless there were ‘exceptional circumstances’.

Now the government has indicated that it will push for a full scale review of the UK auditing profession.

Greg Clark, secretary of state for business, stressed that a review was required to combat the lack of competition and inability of non-big Four firms to gain any level of market share of statutory audit, according to an interview with the Financial Times. However, a spokesperson at the Department for Business, Energy and Industrial Strategy stressed that the decision was for the CMA, not government, adding that ‘the business secretary has urged the CMA to consider what can be done to improve competition in the audit sector. It is for the CMA to examine the options and determine how best to investigate this issue.’

The CMA has not taken any decision about an investigation as yet, although this is under review.

CMA chair Andrew Tyrie said: ‘The CMA has been considering for some time how best to contribute to work being carried out to improve audit.’

It is possible the CMA could conduct an initial market-led study, and then ask government to introduce legislation to tighten up the existing competition rules, the CMA confirmed. This can take up to a year, although a full market investigation, similar to the 2013 investigation into statutory audit.

Over the summer, it is understood that the ICAEW and the Financial Reporting Council, along with senior audit figures from the Big Four and mid-tier firms, had lengthy talks about how to improve the current audit market, with a number of meetings held with the CMA.   

Currently over 97% of FTSE 350 statutory audits are controlled by Big Four firms – PwC, Deloitte, EY and KPMG – while mid-tiers Grant Thornton and BDO only hold a handful of the major listed audits, with one apiece in the FTSE 100.

Pressure on the audit profession is growing with government and stakeholders calling for action.

Also ongoing is the government commissioned Kingsman review into the effectiveness of the Financial Reporting Council (FRC), which is due to report back by the end of the year.

Another initiative led by the Department for Business (BEIS), ICAEW and the FRC is trying to put together an independent review panel to conduct a root and branch review of the audit profession. However, this so-called Project Flora has stalled as they have been unable to find a suitable, independent candidate to chair the investigation. It is six months since the idea was first conceived, with no progress.

The Department for Business, Energy and Industrial Strategy has been contacted for comment.

Report by Sara White

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