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November 1, 2010

Mid-tier supports audit market intervention: Lords enquiry

Mid-tier audit firms have told the UK’s House
of Lords economic affairs committee that intervention is needed to
tackle concentration in the audit market.

BDO and Grant Thornton said they are willing
to invest in order to build the size and scale required to audit
FTSE 100 companies, however, they believe that getting those
opportunities under current conditions is difficult.

BDO managing partner Simon Michaels said the
UK has a great opportunity to take the lead in the EU reform of the
audit market.

“We are very happy to invest to get the EC
audits but we will do that if we only have the opportunity to get
this work,” said Grant Thornton head of external professional
affairs Steve Naslin.

RSM Tenon finance director Russell McBurnie
also bemoaned a lack of opportunity, noting: “Clients want firms to
have experience, however we can’t offer the experience if the
opportunity is not given to the mid-tier.”

The mid-tier said there is evidence that shows
a growing concern over the systematic risk of market concentration
and that regulatory intervention should be considered in light of
this risk.

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Mazars strongly suggested joint audits as the
solution for the market and the firm’s head of corporate and public
interest markets David Herbinet believes this has proven to be
cost-effective and efficient.

However, audit rotation was met with
skepticism from other parties. It is often felt that joint audits
add unnecessary bureaucracy to the process.

Although the mid-tier would like a greater
slice of the FTSE pie, they accept at present only the Big Four are
able to audit banks.

RSM Tenon, BDO, Grant Thornton and Mazars were
all against the suggestion to introduce mandatory re-tendering with
one of the main arguments being that the buying pattern should to
be changed.

The economics affairs committee is still to
hear the opinions of the Big Four.

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