The Big Four and mid-tier firms have been holding meetings at the Institute of Chartered Accountants in England and Wales (ICAEW) to avoid an investigation by the UK’s Competition and Markets Authority (CMA).
Discussions have been held to address the lack of competition in the audit market and the dominance of the Big Four, which have recently come under scrutiny in the UK due to recent high profile cases of audit failure and suggestions of conflict of interest.
The meetings have reportedly involved board members and heads of audit from the Big Four as well as BDO, Grant Thornton, RSM, Mazars and Moore Stephens.
The CMA’s chair Andrew Tyrie has previously described the Big Four as an ‘oligopoly’ and that the lack of competition in the audit market is something that needs to be looked into.
The Times reported that the proposals, which will have to be signed off by the end of the summer by all nine firms involved in the meetings, are likely to include imposing quotas on the amount of FTSE 250 companies that a firm can audit.
However, In March this year, Grant Thornton announced that it would no longer compete to audit FTSE 350 companies because of the dominance of the Big Four.
It was also reported that there will possibly be a commitment by the Big Four to lend staff and technology to smaller firms and potentially introducing joint audits which would require to firms to audit a company.
The rival firms have recently stated breaking up the Big four is not the answer to increasing audit quality and preventing conflicts of interest from occurring but have admitted more competition is needed.
EY UK head of audit Hywel Ball said: “The CMA has challenged the profession to suggest some solutions to increase choice in the market. We are working with the ICAEW and the rest of the profession to respond to that challenge.”
ICAEW’s CEO Michael Izza was in attendance at the meetings and a competition lawyer had been asked to attend the meetings to prevent against possible collusion. This magazine approached the ICAEW for comment but did not receive a response by the time of publication.