A UK Competition Commission (CC) statutory
audit survey found 83% of FTSE 350 companies that recently switched
auditors opted to choose another Big Four firm while 97% of all
switches have been to or among the Big Four.

This highlights a high level of concentration
in the UK’s audit sector, in which four firms carry out an
overwhelming majority of listed company work.

The CC has been investigating concentration
levels in the UK following an Office of Fair Trading referral in

The survey includes a sample of 607 interviews
with FTSE 350 and non-FTSE 350 financial directors, chief financial
officers and audit committee chairs.

Similar to FTSE 350 companies, 90% of non-FTSE
350 companies also stuck to the Big Four when switching

Half of FTSE 350 companies that switched
auditor said it led to a decrease in audit fees and 64% said it led
to improved audit quality. The results were similar for non-FTSE350


Two-fifths of companies have tendered in the
past five years with FTSE 350 companies less likely to do so than
non-FTSE companies.

Half of the companies surveyed last tendered
six or more years ago or have never tendered. The most common
reasons for not changing auditor were high quality service, good
value for money and the fact that a company is happy as things

Interestingly, companies that use a non-Big
Four firm (26%) are more likely to have never tendered than those
who use a Big Four firm (11%).

When asked which firms are most commonly
invited to tender, the Big Four dominate with KPMG and Ernst &
Young mentioned most.

The survey found the disparity between the
proportions of FTSE 350 and non-FTSE 350 companies that only
invited the Big Four. Six out of ten FTSE 350 companies only
consider Big Four firms in tenders compared with 46% of other

The survey found Big Four only tenders were
linked to the company’s size. Seventy percent of companies with
10,000 or more employees only invited the Big Four to tender
compared to 59% of companies with fewer than 10,000 employees.

When asked who they would consider if their
current auditor ceased trading, FTSE 350 companies indicated they
were much more likely to consider the Big Four.

In terms of audit fees, 26% of FTSE 350
companies spent between £1m-£5m on audit annually while 45% spend
anything up to £500,000.

For 38% of FTSE 350 and 14% of other
companies, more than 40% of fees went towards the audit of a
company’s subsidiaries abroad.

Most FTSE 350 financial directors and chief
financial officers said that a disagreement over non-audit services
would not be a trigger to consider switching auditors, indicating
that companies do not view the provision of non-audit services as a
conflict of interest with audit.

The CC has so only published the findings of
the survey and is yet provide its views on the information

The CC is expected to issue a final report
into audit market concentration at the end of the year or early

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