CMA Consultation Sees Big Four Audit Firms Backed By Asset Managers


    Investment management companies have called on the competition watchdog to ensure that the quality of audit is not affected as it is investigating the dominance of the so-called Big Four firms.

    As a response to the Competition and Markets Authority, Standard Life said that the division of the dominant audit firms – Deloitte, PwC, EY, and KPMG – is “undesirable.”

    In the response that was published last Saturday, it stated: “The greater risk is that the scale of auditing becomes too small to warrant it continuing as a service with the conglomeration of services provided by the Big 4 and there is a market withdrawal.”.

    It added: “The splitting up of the Big 4 or other measures to reduce the workload would exacerbate this risk…The splitting of the big 4 to create eight firms is undesirable.”

    The competition watchdog is reviewing whether the audit market is fit for the purpose after a number of failures that were experienced in the sector.

    Both Carillion and BHS were given a clean financial bill of health by KPMG and PwC respectively prior to their high-profile collapses.

    Various investment companies were concerned that smaller firms were ill-equipped to audit the finances of large multinational businesses.

    Schroders, a global asset management firm, stated: “The drive towards companies appointing firms outside of the Big Four is unrealistic and risks further undermining the audit profession.”

    It added: “Based on their existing capabilities, medium and smaller audit firms are generally unable to provide a proper audit service to large global or highly regulated businesses.”

    The response continued: “Outside of the Big Four firms, our experience is that the audit firms are generally unable to deliver a global audit independently.”

    USS Investment Management further stated: “We would also like to emphasise that we would not favour any UK-only remedies such as this that might impair our ability as a global investor to encourage globally consistent governance practices.”