• Register
Return to: Home > News > Standards > CC provisional findings responses see Big Four and mid-tier split

CC provisional findings responses see Big Four and mid-tier split

Top accounting firms' response letters to the UK Competition Commission (CC) reveal a difference of opinion between firms, with the Big Four questioning and the mid-tier welcoming CC's the key findings.

Big Four firms responding to the CC raised serious concerns about the evidence base for the provisional findings, with KPMG UK writing in its response that the firm believes the CC's provisional findings would not be confirmed.

"The evidentiary basis for the provisional findings is unsound and the CC's provisional conclusions contain material internal inconsistencies such that a finding of an adverse effect on competition cannot, on the balance of probabilities, be supported," KPMG wrote in a letter to CC.

Ernst & Young (E&Y) said in its response that it has a pervasive concern that the CC, "has not established clearly its concerns about the prevailing architecture, audit quality or any of the other features it has observed, have led, in practice, to adverse effects".

"Given the recognised importance of audit quality, we are also concerned that the CC has not considered the potential impact of the proposed remedies on audit quality. The CC should be cautious about recommending far reaching changes without stronger evidence of current adverse effects, and without having conducted a detailed examination of the potential impact of the proposed remedies on audit quality," E&Y said.

E&Y and KPMG echoed PwC's concerns, which the firm made public a couple of weeks ago, saying the CC, "selectively used evidence in an unbalanced way to consistently reach findings that support the theories of harm rather than the conclusion that the market is functioning effectively".

While the Big Four questioned the provisional findings, the mid-tier players backed most of the CC's thoughts, with Grant Thornton UK saying: "The findings of the CC set out in the provisional findings reflect concerns raised by many stakeholders about the structure of the UK large company audit market, and are broadly in line with our own direct experience and our observations on the operation of the wider market".

BDO UK said the CC has not addressed "the central question" of the investigation regarding "whether four suppliers are sufficient to serve the statutory audit market, particularly given the near total monopoly of the Big Four firms in the supply of audit services to FTSE350 companies".

"The existing levels of concentration in this market mean that each of the Big Four firms is "too big to fail", but we consider that the CC has given insufficient consideration to this scenario," BDO UK said in its response.

BDO UK's response was similar to Mazars', which questioned whether the CC investigation will lead to firms other than the Big Four gaining market share over the next few years.

The CC issued its provisional findings in late February and is expected to issue a final report with potential remedies to increase competition in the autumn.

 

Top Content

    Blockchain and the Big Four: does it deserve all the hype?

    Although still in its infancy, blockchain is one of the most talked-about technologies of 2018. Will the blockchain bubble burst, or will it live up to its reputation as the ‘new internet’? Eleanor Jerome investigates

    read more

    Malaysia: Ready to show its strength

    Recent changes have enhanced the quality of audit reports in Malaysia, giving the profession a welcome opportunity to demonstrate its value to clients. Paul Golden reports

    read more

    China: Regulating the Chinese dragon

    Harsh regulatory actions and looming US trade wars have been dampening expectations in a Chinese market still full of potential, finds Jonathan Minter

    read more

    Indigenous Australians: New checks and balances

    With fewer than 40 known qualified Indigenous Australian accountants, Jonathan Minter speaks to Shelley Cable from PwC Australia about how increasing this number is an important part of improving the financial literacy of Indigenous communities

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.