Competition watchdog calls for laws to address audit sector competition shortfall

The Competition and Markets Authority (CMA) has warned of the need for legislative protection from lack of resilience in the audit sector to the possible loss of the so-call big four firms and from inadequate competition the sector.

The competition watchdog’s recommendations in its final report on the audit industry include:

• separation of audit and consulting services in the big four (Ernst & Young, Deloitte, KPMG and PricewaterhouseCoopers);

• a mandate on the big four to work jointly with smaller competitors in the audit sector to enable challenger firms to develop the capacity to audit the largest companies; and

• the introduction of statutory regulatory powers to step up the accountability of companies’ audit committees.