KPMG, PwC, Ernst & Young and Deloitte have
said the current competition levels in the UK statutory audit
market are sufficient and reflective of client needs, according to
their initial submission to the Competition Commission (CC).
The Big Four firms dismissed Office of Fair
Trading (OFT) claims that low rates of tendering and switching are
a sign of competition not work well in the audit industry.
KPMG UK said in its response that competition
in the audit industry, “as in other professional services
industries differs from, for example, competition in the supply of
“The level of switching arises because audit
firms are incentivised to make and maintain relationship-specific
investments in order to meet customer needs and to respond to the
competitive pressures in the industry,” KPMG said in its
PwC said it fundamentally disagrees with the
OFT that market share is indicative of problems with
“The audits of large companies require certain
attributes which only the largest auditors are capable of
providing,” PwC said.
Deloitte said there are a number of
capabilities that FTSE350 clients or potential clients require of
“Our significant investment in developing
these capabilities has been completely responsive of client demand.
We were there for surprised by the OFT’s suggestion that such
capabilities are barriers to entry,” Deloitte said.
The only mid-tier firm to respond to the CC so
far, Grant Thornton UK, disagreed with its market leading
competitors by telling the CC there is significant concentration in
“The high level of concentration amongst the
four largest providers of audit services to large companies in the
UK has persisted for a significant period of time. Grant Thornton
and the other suppliers of audit services have been unable to break
the stranglehold that the four largest suppliers of audit services
have on the market,” Grant Thornton said.
The mid-tier firm also called for the
abolition of restrictive covenants or the so called Big Four only
clauses. Only E&Y acknowledged the existence of such documents
in their response to the CC and said that removing Big Four only
restrictive covenants would increase choice as well as several
other measures such as reinforcing the audit committee’s role in
auditor appointments, publication of independent inspection results
for all listed company audit firms, liberalising audit firm
ownership rules and the creation of a single market for audit
services in Europe.
E&Y also suggested the CC carefully
inspects the role of the buyer, “in order to avoid unintended
consequences – including threatening audit quality”.
The OFT 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
The Competition Commission is required to
report on its findings by 20 October 2013, although the body said
it will aim to complete the investigation in a shorter
OFT refers audit market to the Competition Commission