Latest in the statutory audit market study
First published by Author on March 14, 2019 in the following categories: Incentives Industry Investigations Latest and tagged with cma | competition law | investigations
The statutory audit market study was launched in October 2018, and we’re set to know more about the outcomes toward the end of this year.
This is a key market sector where the CMA (Competition and Markets Authority) has raised a number of concerns that they’re looking into. Despite previous improvements in the sector that appear to have strengthened competition, Deloitte, E&Y, KPMG and PwC reportedly remain the “go-to” auditors for the majority of large companies.
There’s also a concern as to whether there’s a lack of incentive to produce challenging reviews in terms of the performance of the companies as well.
Background to the statutory audit market study
In October 2018, the CMA launched their statutory audit market study. Their aim was to look into three key things they consider may be issues. These are:
- The ability to choose and switch;
- The long-term resilience of the sector;
- Incentives between audited companies, audit firms and the investors.
An immediate review was ordered to ensure that competition is healthy within the sector. They will also look to determine whether there’s any anti-competitive behaviour going on as well. The issues appear to have arisen after the catastrophic collapse of Carillion where criticism against those who were reviewing the company’s books and carrying out audits was made.
In the initial CMA press release, Chairman of the CMA, Andrew Tyrie, candidly highlighted why this study is such an important one. He said:
“If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective.”
He also said that: “the CMA will now examine the market carefully to establish what contribution more effective competition could make to improving audit quality.”
Latest in the statutory audit market study
The deadline in the statutory audit market study is set for October 2019. The deadline for responses to update the paper was in January, and from what we understand, there has been a large number of respondents.
We’ll continue to monitor developments in this important sector that is key when it comes to the success of large organisations. The knock-on effect that a collapse can have on the thousands of employees and stakeholders cannot be ignored.