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April 23, 2019

ACCA ‘disappointed’ with CMA’s proposals for reforming UK audit industry

By Joe Pickard

ACCA executive director of governance Maggie McGhee has described many of the remedies the Competition and Markets Authority’s (CMA) recommended in its report into the audit market as disappointing.

The CMA’s final report into improving competition in the UK audit industry was published last week, and proposed mandatory joint audits and an operational split of the Big Four.

In the ACCA’s response, McGhee was quoted as saying the ACCA was “disappointed that many of these remedies have been carried forward unchanged in the CMA’s final report.”

In December 2018, the CMA published an update paper establishing some of its initial proposals. At the time, the Association of Certified Chartered Accountants (ACCA) highlighted the risks to audit quality of the CMA’s proposed remedies.

McGhee added: “We maintain that other measures, such as a cooling-off period after rotating off the audit and a prohibition on management dismissing an audit firm, would be more effective in increasing audit quality in the short term.

“These measures would also allow the CMA more time to understand the impacts of its remedies by introducing them on a small-scale trial basis. ACCA made these recommendations to the BEIS Select Committee in our evidence. The BEIS Select Committee strongly recommended these proposals for consideration by the CMA.

“By introducing such wide-ranging proposals simultaneously, the CMA may fail to identify the policies that increase audit quality due to those that harm it. Instead, ACCA believes the CMA should use its proposal for a five-year review of progress to trial, rather than mandate, their recommendations in order to give an informed and balanced understanding of their viability.”

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