UK watchdog takes aim at UK accounting deals
By Huw Jones
LONDON (Reuters) - Britain's listed companies could be forced to switch accountants to boost competition and end the cozy relationships that have dismayed shareholders, a UK watchdog warned on Friday.
Competition in the UK audit market is restricted by factors that make it hard for companies to switch accountants, the Competition Commission said in preliminary findings from a probe it began in 2011.
There is also a tendency for auditors to focus on satisfying management rather than shareholder needs, it said.
The commission's findings disappointed the big accountants but raised a cheer among their smaller rivals and will bolster a draft European Union law which contains similar plans for boosting competition in the 27-country bloc's audit market.
The United States is also mulling auditor rotation as the sector globally faces questions after it gave banks a clean bill of health just before governments had to rescue them in the 2007-09 financial crisis.
The "Big Four" - KPMGKPMG.UL, PwC PWC.UL, Ernst & Young ERNY.UL and DeloitteDLTE.UL - check the books of nearly all big companies in Britain and around the world and have often served the same clients for decades.
"We have found that there can be benefits to companies and their shareholders from switching auditors but too often senior management at large companies are inclined to stick with what they know," said Laura Carstensen, who chaired the watchdog's audit probe.
The lack of competition is likely to lead to higher prices, lower quality and a failure to meet the demands of shareholders and investors, the commission said. Continued...