Minister orders review of Big Four auditors

GREG CLARK, the Business Secretary has called for a wide-ranging review of the audit industry amid increased concerns about competition and conflicts of interest within the sector.

He has told the Competition and Markets Authority (CMA) to carry out a review of competition in the industry, which is dominated by the four companies: Deloitte, PWC, EY, and KPMG.

“There are questions about the competitiveness of the audit market and there are questions about conflicts of interests,” Mr Clark told the Financial Times.

Doubts about the effectiveness of auditing companies have been exacerbated by the collapse of the outsourcing company Carillion and the retailer BHS.

Mr Clark has also asked Sir John Kingman, a former Treasury official and chairman of Legal & General, to carry out an inquiry looking at ways of removing conflicts of interest in the sector and investigating whether auditors of large listed companies should be appointed by a public body.

The Department for Business has said that new legislation designed to increase the effectiveness of the audit industry may be created as a result of the new inquiries.

In May, a select commitee report called on the CMA to consider breaking up the socalled Big Four accountancy firms over their involvement in the “rotten corporate culture” at Carillion.

It said it exposed the audit market as a “cosy club incapable of providing the degree of independent challenge needed”. It said KPMG had been complicit in the company’s accounting practices.