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March 8, 2011

BDO urges review of Australian audit market

BDO Australia has urged regulators to follow the EC’s lead on considering market intervention to improve choice and competition in the audit industry.

In most countries, the Big Four audit most of the largest listed companies and the EC has put forward several proposals to dilute market concentration. This has been followed by a joint statement from some of the largest global firms outside the Big Four – BDO, Grant Thornton, RSM International and Mazars – which calls for market intervention to help the second tier firms compete more successfully for large company audits.

Audit reform is a hot topic in Europe but it is yet to gain much traction in Australia. BDO national chairman Tony Schiffmann said the EC’s consultation should serve as a “wake-up” call to national authorities, including the Australian Securities and Investment Commission and Australian Competition and Consumer Commission.

“Australia was fortunate to avoid the worst impacts of the global financial crisis, but it is no reason for us to be complacent about the most important tool we have to assess the financial strength of companies,” he said.

Schiffmann would like to see audit market authorities consider:

  • A ban on lenders and insurers stipulating the use of Big Four firms for audit and other services in contracts
  • Introduction of rules that require audit committees to regularly reassess audit appointments
  • Consideration to joint audit firm appointments on top 100 listed companies
  • ACCC review of Big Four acquisitions of smaller firms to prevent consolidation of audit and other accounting functions
  • A debate about rotating auditing firms for large companies

In Australia, BDO is the sixth largest firm and nearly quarter of the size of Deloitte, the smallest of the Big Four.

 

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