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Mazars UK pushes for joint audits and market-share cap in response to the CMA

Mazars UK has put forward a proposal to cap the Big Four market share in the FTSE 350 and proposed joint audit solutions in their response to the UK Competition Markets Authority (CMA) audit market investigation.

The cap would aim to reduce the Big Four market share in the FTSE 350 and the rest of the listed market to 80% after five years, with joint audit introduced at the upper end of FTSE350.

The firm said in their submission: “Such caps will give the main challenger firms, including Mazars, sufficient time to expand as needed. Caps would remain in place until the CMA determined a sustainable and resilient competitive audit market had emerged.”

The introduction of joint audits to the upper end of the market was explained by the firms as needed due to a “substantial concentration of audit fees in this part of the market and it is where the systemic risk is greatest”.

“Joint audit will also allow the reform to be achieved with fewer audit switches than would otherwise be needed as challenger firms will be able to steadily build up their share of large audits in the early years of the reform being implemented with a linkage to improvement in audit quality overall,” Mazars UK said.

Mazars has always been in support of joint audit as they are common practice in France where the network’s international operations are based.

In the open response to the CMA, Mazars also highlighted challenges facing the audit market momentarily, which poses a threat to audit quality. This includes excessive levels of concentration, challenges of maintaining an orderly market and mitigating any risk of one the Big Four leaving the audit market.

The firm also supports the need of independent reviews for the future of auditing and reporting. In the response it said: “We support a major independent review being undertaken of the current and future needs of investors and other stakeholders with regards to audited information in corporate reports and how the information should be presented to maximise accessibility and improve understanding.”

The CMA opened the investigation into the audit market on 9 October 2018 after calls to do so by Members of Parliament.

Read Mazars’s full letter here.

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