PwC UK has issued a response
to the Competition Commission (CC) criticising comments made to it
by certain stakeholders and mid-tier audit firms on the back of its
investigation into audit market concentration.
The Big Four firm picked up
on comments from stakeholders to the CC linking concerns they have
about the regulatory framework for corporate governance to a lack
of competition or quality in audits and the extent of
innovation.
PwC also accuses some
stakeholder comments as lacking “evidence to back them up” adding
when evidence is provided it “does not, when subjected to scrutiny,
support the allegation in question”.
According to the firm,
‘information asymmetries’ as mentioned in the comments “do not
reduce audit quality” due to a number of factors including an
effective regulatory and structural framework to ensure the
scrutiny of the audit process.
In relation to comments made
on audit quality and innovation the firm says these are “high” and
there is evidence to back this up, but the firm said it does
recognise some innovations may not be “directly visible to
shareholders, with whom we do not interact directly in the delivery
of the audit other than through the AGM, but this does not detract
from their value”.
Mid-tier
concerns
PwC’s criticism relating to
the mid-tier is with regards to comments acknowledging that “large
audit firms have a ‘superior market reputation for quality and
trust in conducting large company audits’ but suggest those
responsible for acquiring audit services and other stakeholders are
operating under a systemic misconception and that this superior
reputation is not deserved”.
In response to the comments
on auditor reputation PwC defended the position saying it reflects
the “reality of the customer experience” and the reputation of
large audit firms for their quality is a consequence of investments
these firms have made.
PwC also said certain
mid-tier arguments suggesting large audit firm reputation is
‘undeserved and/or is relied on inappropriately by large companies
when selecting an audit firm’ does not stand up when
scrutinised.
The Office of Fair Trading referred the
issue of audit market concentration and lack of competition to the
CC for further investigation in October 2011, following the UK
House of Lords Economic Affairs Committee audit market competition
inquiry recommendation.
The CC is required to report on its
findings by 20 October 2013, although the body said previously it
will aim to complete the investigation in a shorter
period.
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