more-arw search

UK plans investigation of auditors

Major auditors like Deloitte dominate the market.

The audit industry could face a shakeup as the Office of Fair Trading in the UK referred the sector to that country's Competition Commission, according to the BBC.

Most companies that decide to have their finances audited would prefer to spend the extra money to ensure that they are getting the best in the business.

However, this natural preference has led to a heavy consolidation of power among auditors. PwC, KPMG, Deloitte and Ernst & Young, the so-called Big Four auditors, accounted for 99 percent of the auditing fees paid by companies within the FTSE 100 last year.

"The OFT has been concerned for some time that the audit market is highly concentrated, with low levels of switching and substantial barriers to entry," the OFT explained in a statement.

The switching factor proves crucial, as intense competition between those four would similarly represent a healthy market, but the agency found that only 2.3 percent of the FTSE 100 companies changed auditors between 2002 and 2010.

CFO World reports that executives from the Big Four spoke favorably of the decision to bring in the Competition Commission, with Richard Sexton of PwC suggesting the investigation should show how heavy the competition already is.