The UK Government is against “radical” reform of the audit market, as proposed in the recent EC Green Paper, a letter to the EU consultation on the audit market reveals.
The summary letter also reveals the government does not welcome increasing the scope of audit.
The Government said the “forced” breaking up of the Big Four in order to tackle audit market concentration would have to take place on a global scale and could have “unintended consequences”.
It does however welcome new ways of organising audit firms and the expansion of the audit market. Dismissing mandatory joint audits, the letter said the UK would not support the ban on non-audit services but instead supports the idea of group auditors.
Despite several concerns raised over Big Four only clauses in the past months by the mid-tier firms, the Government believes that such documents are the responsibility of the competition authorities, although it does not state why.
The letter suggests enhancing skepticism of auditors to improve audit quality and enhancing company reports by adding a section explaining the work of an audit committee within a listed company.
One of the main issues exposed so far by the House of Lords inquiry into audit market concentration is the lack of communication among auditors, stakeholders and audit committees.
Government opinion contradicts the views of the profession at a large, saying there is adequate and regular dialogue in the UK between internal and external auditors and audit committees.
The summary letter sent from the UK department of business is the first indicator of the opinion held by the current coalition government on audit reform.