The UK market for auditing services over the past decade has been dominated by four large firms. At a time when issues over corporate responsibility, particularly in the financial sector, is high on the business agenda, the Competition Commission (CC) has decided to carry out a market investigation to identify whether concentration in the market is having any adverse affect. On 7 December 2011, the CC published a statement setting out the issues it proposes to investigate and requesting evidence.

The issues identified for consideration include:

  • the obstacles which smaller audit companies need to overcome in order to enter or expand in the market;
  • whether concentration is resulting in higher prices or costs and lack of efficiency;
  • the extent to which the major firms are in a position to ‘bundle’ services, in other words, require customers seeking audit services to also take other services (e.g. tax advice, transaction services and corporate finance);
  • the costs associated with switching from one firm to another.
  • the potential for collusion in the market as a result of the level of concentration and lack of competitive constraint from smaller rivals; and
  • the potential for regulatory failure as a result of the influence of the firms or that the fear associated with the potential failure of one of the firms could induce the regulator to protect them, for example through tailored intervention.

The CC is due to report on its findings by 20 October 2013.

Related item:

Audit Market Investigation

To access a copy of the Competition Commission’s issues statement on the audit market click here