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Your assignment is to prepare and submit a paper on the uk's audit market. Today majority of the large corporations prefer to hire the Bid Four auditing firm and thus the mid-tier auditing firms have
Your assignment is to prepare and submit a paper on the uk's audit market. Today majority of the large corporations prefer to hire the Bid Four auditing firm and thus the mid-tier auditing firms have a very small role to play in the contemporary audit market. Therefore, the matter of concern is “whether lack of competition in the audit is responsible for such poor performance of these Big Four?”
In Britain “the Big Four” accountants have a strong market share in the audit market. Despite the effort given by the regulators, there is no significant increase in the degree of competition. The “Big Four” accountants are Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers. As per the latest data published by Hemscott, more than 95 percent of the FTSE 350 firms and 63 percent of total UK listed companies are being audited by the ‘Big Four”. From the last four years, the Financial Reporting Council (FRC) is taking the initiative to increase competition in the audit market by expanding the number of choices of firms but it hardly succeeded. As compared to the moderate or small firms, the large public firms listed in FTSE 100 rely more on the big audit institutes. Among all the FTSE 100 listed companies, only Randgold Resources, a well-known mining group is audited by BDO. As per the large companies, the quality of the service that is provided by these “Big Four” makes them an attractive accountant to be hired. However, the partner of Grant Thornton, the fifth largest auditing firm in the UK pointed out that the small auditing firms do possess the ability to handle accounts of large companies. It was also said that the UK banks are responsible for such poor competition in the UK’s audit market (Spence, “Big four maintain hold on UK audit market”). These banks ask the companies to audit their financial statements by the “Big Four” while developing the lending agreements. It has reported that a simple banking covenant of £270m agreements restricts Amedisys to choice the “Big Four” and thus the possibility of .hiring a mid-tier auditing firm got obsolete.
