UK accountants on tenterhooks before probe outcome

Mon Feb 18, 2013 8:17am EST
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By Huw Jones

LONDON (Reuters) - The "Big Four" accounting firms should find out this week how their grip on Britain's audit market could be loosened in a ruling Europe and the United States will scrutinize.

The Competition Commission launched its probe into the audit market for the country's 350 top listed firms in 2011 but has delayed its preliminary findings twice to this month. It said it was hoping to make an announcement this week.

Britain's market mirrors the global sector with just four companies - KPMG, PwC, Ernst & Young and Deloitte - checking the books of 90 percent of UK listed blue chips.

The probe was partly prompted by a House of Lords inquiry which found that listed companies, which must have their annual reports signed off by an auditor, use the same accountant for an average of 48 years, a figure the Big Four dispute.

The fear is that auditors become less sceptical over time about what clients tell them. Policymakers were also angered that accountants gave banks a clean bill of health just before taxpayers had to rescue them in the 2007-09 financial crisis.

The Big Four's audit and advisory income easily outstrips rivals: PwC had UK revenues of 2.5 billion pounds last year, with Deloitte at 2.1 billion, KPMG 1.7 billion, and E&Y at 1.5 billion, according to Competition Commission figures.

In the next tier, Grant Thornton, which audits five of the top 350 firms, brought in 377 million pounds, BDO, which audits 57 of the 350 top firms, 280 million, and Mazars 109 million.

So far the watchdog has found no evidence of collusion among the Big Four but says they enjoy a "virtuous circle" of deep experience, making it harder for rivals to break in. Many chairs of company audit committees are former Big Four employees.   Continued...

The Deloitte Company logo is seen on a commercial tower at Gurgaon, on the outskirts of New Delhi August 9, 2012. REUTERS/Parivartan Sharma