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January 25, 2011

UK Government to improve transparency in audit committees: HoL

The UK government has expressed serious
concern over the lack of competition in the audit market and plans
to address the issue by improving the transparency and disclosure
of audit committees, the HoL audit market inquiry was told
employment relations minister Ed Davey.

“We have some serious concerns regarding
competition in terms of lack of choice and high fees,” Davey
said

The House of Lords economics affairs committee
was also told that the government does not plan to make radical
regulatory actions to de-concentrate the market.

“We are not attracted to use very regulatory
approaches. A heavy handed approach is not our first approach,”
said Davey.

The government plans to ensure greater
transparency and disclosure of companies over their audit
committees by gathering information on adopting an auditor, how
long the firm has used its existing auditor and what its policies
are on testing the market, Davey said.

“Greater transparency in these areas might
encourage auditors to look again at their auditors and for
investors to have this information so they can challenge the audit
committee,” Davey explained.

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Davey also said the government does not see
the possibility of systemic risk in the market. “I should say that
some of your witnesses have suggested there is a huge systemic risk
here. I’d like to say that we don’t see this that way. Partly
because audit is only a part of the assurance that investors can
have,” Davey said.

The HoL committee has expressed concern over
the planed government actions and the belief that there is no
systemic risk.

Committee member Lord Forsyth said the
government appears to be too complacent on the issue of market
concentration.

Committee chair Lord MacGregor said the
committee is very aware of some of the difficulties facing the next
tier of firms in competing in the Big Four market. “I have to say
I’m not sure there are possibilities without helping the system to
solve this problem,” Lord MacGregor said.

The House of Lords economics affairs committee
is expected to present its final report and recommendations to the
government in the spring.

 

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