• Register
Return to: Home > News > Deloitte warns audit market reform could make UK less attractive after Brexit

Deloitte warns audit market reform could make UK less attractive after Brexit

Deloitte has warned the UK’s Competition and Markets Authority (CMA) to be careful if it overhauls the statutory audit market, expressing fears that the UK would be a less attractive market post-Brexit.

In its response to the CMA study, Deloitte said: “It is particularly important that at the time that the UK is leaving the EU any changes do not put the UK out of line with global norms or add significant costs and complexity for companies, their shareholders or auditors.

“Such changes could materially damage the UK’s competitive position and particularly London’s place as a leading capital market. This is one reason why the CMA should seriously consider whether a market investigation reference is appropriate.”

The need for change to the FTSE 350 audit market has had unanimous support from the UK’s leading firms. At the same time, the same firms have strongly expressed a need for caution before introducing any major overhaul. The main reason for this is the fear of creating a range of unintended consequences.

The main unintended consequence respondents to the CMA review have given is the worry that an overhauled audit market could actually reduce audit quality. Another is the possibility of additional costs for businesses if a joint audit model is introduced, without necessarily improving audit quality.

The notion of introducing market caps to the FTSE 350 market has gathered support, but most firms have expressed the need for these to be carefully introduced.

EY expressed the concern that a market share cap could reduce the amount of choice a company has in selecting its auditor if a Big Four firm already has its allocated share of FTSE 350 clients. While this has been suggested by some mid-tier firms as bias on the demand side, if a company cannot select its own auditor it could be seen as just another regulatory restriction.

If these unintended consequences manifest, it could be to the detriment of the FTSE 350 market and wider UK economy. As it stands, the UK is set to crash out of the EU without a deal on its future relationship with the world’s largest trading bloc. A range of UK headquartered business have already moved or have announced their intention to move following Brexit. With further regulatory pressures and additional costs, this could make the UK an even less appealing country to do business in.

Top Content

    Brazil: regulation and technology form basis for recovery

    Opportunities in the capital markets and the ever-growing influence of technology are expected to have a significant impact on the Brazilian accounting profession over the next 12 months, writes Paul Golden.

    read more

    Mentoring support and the opportunity to delegate

    Jon Lisby will be known to many from his former role as CEO of Kreston International. Here, he explains the background to his new venture, Global Alliance Advisory Services (GAAS), and how he aims to offer support to alliance CEOs.

    read more

    Global by name, global by nature

    Stephen Heathcote became chief executive officer of PrimeGlobal on 1 June 2019. Robin Amlôt met him to discuss the various new challenges that he has taken on, and his ambitions for the association.

    read more

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    CORONAVIRUS TIMELINE: REACTIONS FROM THE ACCOUNTANCY PROFESSION

    As the Coronavirus (COVID-19) continues to spread across the world, the International Accounting Bulletin and The Accountant will be collating all the latest news and updates from the profession on the pandemic’s impact.

    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.