Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee, has commented on the Competition and Markets Authority proposals on the audit market and the separate report by Sir John Kingman report on the Financial Reporting Council (FRC).
Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee said:
"Recent accounting scandals and the failure of audits at companies such as Carillion have made it clear that it can no longer be business as usual for the Big 4 or the audit market which they dominate.The audit sector is beset by conflicts of interest, a confused sense of its purpose and a lack of competition. That needs to come to an end.
"The security of people’s jobs and pensions rely on audits providing a true picture of the financial health of a business. The CMA’s proposals are welcome and get to the heart of concerns about market dominance and the conflicts of interest which jeopardise audit quality. The dice have been loaded in the Big Four’s favour for far too long and the CMA is right to identify some of the tough remedies which could be needed to fix this broken market.
"Kingman rightly identifies the FRC as taking too consensual approach to its work. As was witnessed in the case of Carillion, the FRC has been guilty of being too timid and too reluctant to use the powers it has to tackle audit failure. In the future, we need a regulator who is willing and able to identify the signs of corporate failure and step in before it happens rather than picking up the pieces in the aftermath.
"The CMA and Sir John Kingman inquiries outline a range of measures to help ensure the audit market is fit for purpose. But these reports need to be acted upon, not left to gather dust. In our inquiry on the future of audit beginning in the New Year we will take a close eye to the CMA and Kingman recommendations and examine what needs to be done to deliver on these reports and ensure they bring about the reform needed to improve the audit market and audit quality".