The chairs of the work and pensions, business, energy and industrial strategy, and the Treasury select committees have written to the PRA following a report in the Times newspaper suggesting the PRA had raised concerns that Grant Thornton might not have the ‘required skill, resources and experience to perform its function under the regulatory system’.

It has also renewed calls for re-assessment of the way in which the audit market operates for fear of creating ‘Big Four only’ rules, whereby the largest listed audits do not move outside the existing Big Four audit firms.

Goldman Sachs had indicated that the Big Four were not in a position to bid under current rules, as the incumbent PwC, which has been in place since 1922 and earned $54.7m (£39m) for the last audit, is subject to new rules on auditor rotation and all the others had other, pre-existing relationships with the bank.

The joint letter points out that Sarah Breeden, the PRA’s executive director for international banks supervision, had told a Treasury committee evidence session that there was a dialogue ongoing with Grant Thornton where they were being asked to demonstrate that they possessed these qualities.

The letter states: ‘We understand and share the desire to see high quality auditing of global investment banks. The financial crisis underlined how our society suffers if these banks do not have their financial statements adequately scrutinised.

‘It is the case though, that nearly all the banks that failed back then were being audited by members of the Big Four. Given their failings then, and the subsequent failings we have seen in audit such as BHS and Carillion, we would question whether any of the Big Four have sufficiently demonstrated the “required skills, resources and experience” to undertake these audits.

‘We would be grateful if you could elaborate on the skills, resources and experience that are necessary to audit banks such as Goldman Sachs.’

The letter goes on to highlight what the chairs call ‘the shocking lack of competition’ in the audit market, with 99% of the FTSE 100 and 97% of the FTSE 350 audit by one of the Big Four.

Citing Grant Thornton’s announcement earlier this year that the firm intends to withdraw from bidding for FTSE 350 audit as they felt the structures in the market made it impossible for them to succeed, the letter notes: ‘It would be most unfortunate if auditors like Grant Thornton now find that not only is the market working against them, but so too is the financial services regulator.’

On the issue of auditor selection, the chairs point out that ‘such is the range of non-audit services that the Big Four offer that it is commonplace that the choice is narrowed from four down to one’.

The letter states: ‘With PwC as the incumbent auditor, and with new EU regulations requiring Goldman to remove them by 2022, where else should Goldman Sachs turn if Grant Thornton are not suitably qualified? Is the PRA doing any work to try and ensure there is a greater range of bank auditors you would find suitable?’

It concludes by seeking an assurance from the PRA that, were it to block the appointment of Grant Thornton at Goldman Sachs, this could not be viewed as creating a new form of ‘Big Four only’ clause.

Letter from select committee chairs to PRA is here.

Report by Pat Sweet