Britain's listed companies could be forced to switch accountants to boost competition the UK competition commission warned today.
Competition in the UK audit market is restricted by factors that make it hard for companies to switch accountants, the commission said in preliminary findings from an inquiry it began in 2011.
The investigation found that 31 per cent of the top 100 companies and a fifth of the next 250 firms had had the same auditor for over 20 years.
There is also a tendency for auditors to focus on satisfying management rather than shareholder needs, it added.
The commission's findings disappointed big accounting firms but was a positive step for their smaller rivals and will bolster a draft European Union law which contains similar plans for boosting competition in the region's audit market.
The United States is also mulling auditor rotation as the sector globally faces questions after it gave banks a clean bill of health just before governments had to rescue them during the financial crisis.
The "Big Four" - KPMG, PwC, Ernst & Young and Deloitte - check the books of nearly all big companies in Britain and around the world and have often served the same clients for decades.
Inquiry chairwoman Laura Carstensen said "we have found that there can be benefits to companies and their shareholders from switching auditors but too often senior management at large companies are inclined to stick with what they know".
The lack of competition is likely to lead to higher prices, lower quality and a failure to meet the demands of shareholders and investors, the commission said.
There was "significant dissatisfaction" among big investors and changing the "long standing and entrenched" system will take time, Carstensen added.
It proposed a mix of reforms, including forcing companies to put out their audit work to tender every five to seven years, and change accounting firms every seven to 14 years - roughly in line with changes being discussed at the EU level.
The European Parliament's legal affairs committee is due to vote on the region's audit shake-up next month after a delay to await the outcome of the UK findings.
Reuters
