Earlier this week the Competition Commission ("CC") published its provisional decision on the remedies it is considering introducing when it publishes its final report on the supply of statutory audit services to large companies in the UK. The final report is expected by no later than 20 October 2013.
This latest publication follows its provisional findings report which was published in February 2013 in which it concluded that competition was "… restricted in the audit markets due to factors which inhibit companies from switching auditors and by the incentives that auditors have to focus on satisfying management rather than shareholder needs". The main proposals put forward by the CC to counter these concerns are as follows:
- FTSE 350 companies should put their statutory audit engagement out to tender at least every 5 years (a company may defer this obligation by up to 2 years in exceptional circumstances);
- The FRC's Audit Quality Review team should review every audit engagement in the FTSE 350 on average every 5 years;
- A prohibition of "Big- 4-only" clauses in loan documentation;
- A shareholders' vote on whether Audit Committee Reports and company annual reports contain sufficient information;
- Measures to strengthen the accountability of the external auditor to the Audit Committee and reduce the influence of management; and
- The FRC should amend its Articles of Association to include a secondary objective to have due regard to competition.
Any interested party is invited to respond to the provisional decision on remedies in writing by 13 August 2013.