Big Four accountancy firms face UK probe

PRESSURE on the UK’s audit firms mounted as a competition watchdog started investigating the industry a day after another regulator said it was considering banning auditors from doing consulting work for the companies they assess.

In a move that could herald a major shake-up, the Competition and Markets Authority said it would look at concerns about statutory audits that were raised in the wake of the collapse of Carillion in January. The probe increases the risk that regulators may threaten to break up the ‘Big Four’ accounting firms.

That investigation will consider whether auditors have little incentive to produce “challenging performance reviews” of companies, which pick their own auditors. It will look at whether Deloitte, KPMG, EY and PwC may be “too big to fail”. “If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective,” the CMA’s chairman, Andrew Tyrie, said yesterday.

Business Secretary Greg Clark encouraged the CMA to “be ambitious in its thinking and move swiftly”. In a letter to Mr Tyrie on Monday, he said he has “concerns about the operation of the market and the recent events around the collapse of Carillion” and department store BHS Group “have brought this into sharp focus”.