Forcing companies to change their auditor every half a decade or so sounded like a sensible reform when the Competition Commission aired it in February. The big four firms – PricewaterhouseCoopers, Deloitte, KPMG and EY (the silly new name for Ernst & Young) – enjoy something close to utter dominance in the role of auditors to large UK public companies.
This cosy club looked ripe for a shake-up imposed from outside. Smaller competitors might get more of a look-in; fees might fall; shareholders might sleep more soundly for knowing the same old faces wouldn't be inspecting the accounts in perpetuity.
But no. The commission, in its final report, has gone soft. Mandatory changes of auditors has been rejected; mandatory re-tendering is in. In other words, companies will have to run a tender every five years but the incumbent will still be allowed to win. So all those companies who have employed the same auditor for decades – like Marks & Spencer, Barclays and many others – can carry on doing so if they wish.
To the extent that the measure increases competition, it will probably encourage the big four global firms to fight among themselves. But that's about it. As Andre Spicer, a professor at Cass Business School, puts it: "A beauty contest among the big four every five years might keep the sales pitches sharp, but it is less likely to mean the shareholders will get a more objective and accurate view of the company's accounts."
