The Office of Fair Trading (OFT) has
provisionally referred the UK audit market to the Competition
Commission (CC) for investigation.
The OFT’s decision, which it said is because
of concern the market is highly concentrated with substantial
barriers to entry and switching, is pending the outcome of a
six-week consultation period.
After the OFT was asked to investigate audit
market competition by the UK House of Lords Economic Affairs
Committee, the watchdog announced in May it would decide whether
there were appropriate remedies to the issue before it made its
referral to the CC.
“We have had valuable engagement with a wide
range of industry participants over the last two months and, in
light of those discussions, we believe at this time that a
reference to the Competition Commission is an appropriate response
to our long-standing competition concerns in this market,” OFT
executive director Clive Maxwell said.
“A reference would give the CC the opportunity
to conduct a thorough investigation into this market and determine
whether there are any adverse effects on competition. However, we
will of course consider any consultation responses before making a
final decision. We anticipate announcing the final decision before
the end of 2011”.
In response to the OFT’s decision, Deloitte UK
said while it is “supportive of all measures that enhance the
quality and value of audits, and we welcome measures that increase
competition” any changes to the audit market “must not be to the
detriment of audit quality and should not harm the UK’s competitive
advantages as a business location and centre for capital market
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Institute of Chartered Accountants in England
and Wales executive director of technical strategy
Robert Hodgkinson has urged the CC to “subject any
potential market interventions to rigorous impact
assessment and ensure that audit quality is the yardstick
of any decisions that are taken”.
“New regulatory initiatives will also
need to be consistent with European policy
developments and should not impede a highly
successful sector of British business at a time when
everybody should be promoting a business-led recovery,”
Deadline for comment on the OFT consultation
is 9 September.