Reports in Reuters on Sunday (November 11) said the U.K. Parliament will commence an inquiry into the nation's corporate auditing market, which is currently dominated by the Big Four accounting firms Deloitte, PwC, EY and KPMG, adding new pressure on an industry already being probed by other policymakers.
The probe comes as policymakers work to boost competition in the financial services space. Previous efforts include action taken to combat late supplier payments, probes into small business banking scandals, as well as the introduction of Open Banking regulations to promote FinTech innovation. The launch of this latest inquiry, to begin in January, suggests policymakers have no plans to curb efforts to address a range of controversial matters in the financial services market.
The U.K.'s auditing industry has faced criticism in recent months, particularly following the collapse of construction giant Carillion in the beginning of the year. Other recent accounting scandals at retailer BHS and Patisserie Valerie have similarly raised concerns that auditors are unable to adequately identify accounting issues at major corporations before it's too late.
The industry is already being investigated by the Competition and Markets Authority, which has fast-tracked its probe, reports said. A separate review spearheaded by John Kingman is examining the Financial Reporting Council and its ability to tackle issues of accounting scandals and a lack of competition in the auditing sphere.
“The audit market is broken,” said Rachel Reeves, who heads parliament's business select committee, which will begin its own inquiry into the market. “The Big Four's overwhelming market domination has failed to deliver audits which are fit for purpose.”
The CMA has reportedly received calls from members of parliament to require Big Four auditors to separate their auditing and advisory services, Reuters said. Reeves has also slammed the FRC as “toothless and passive,” urging Kingman to introduce reforms for the body.