The Competition Commission has accused the Big Four of dominating the audit market and having overly close relationships with their clients.
In an ongoing investigation begun in 2011, the watchdog found that companies rarely switch auditors, with thirty one percent of the FTSE 100 using the same audit company for more than 20 years. The Big Four currently act as auditors for 90% of the UK’s largest companies.
This results in cosy relationships in which audit companies are too concerned with pleasing management rather than shareholders, the commission concluded. It warned that a rotational system could force companies to switch accountancy firms every 7-14 years in the future.
Whilst the The Big Four were disappointed with these conclusions, many mid-tier firms were positive about the findings, feeling that the mix of changes would created a healthier market.
Binding recommendations will not be made until the end of the year. Find out more about work in audit.