UK move to ensure more competition for auditors
British anti-trust regulators said large companies should be required to put their auditing contract out to tender every five years in a move that falls short of proposals from the European Union to spur auditor competition.
The move, if it became law, would affect Irish companies such as CRH, Kenmare and United Drug which recently moved their listings to London from Dublin.
The requirement to tender auditing contracts every five years should apply to companies in the FTSE 350 Index, the UK Competition Commission said as it published its provisional remedies for the industry.
The regulator stopped short of proposing that companies be forced to switch auditors – a move it was considering in February.
The 16-month probe focused on KPMG, Deloitte, Ernst & Young and Pricewaterhouse-Coopers, the "big four" companies that are also at the centre of an EU effort to increase competition in the industry.
"A more dynamic, contestable market will reduce the dangers that come with over-familiarity and long, unchallenged tenures," said Laura Carstensen, chairwoman of the commission's audit market investigation group.
"The audit function is too important to be left undisturbed for longer than five years."
Regulators embarked on wide-ranging reviews of audit rules following the collapse of Lehman Brothers, which the European Commission said raised doubts about the quality of company audits.
Regional arms of the top four accounting firms have a market share that exceeds 85pc in the majority of EU nations.
The UK plan for mandatory tendering "gives rise to a substantial incremental cost, far higher than the estimated £30m (€35m), and could have a highly disruptive effect on business," said Simon Collins, who is UK chairman of KPMG.
The Competition Commission's decision to hold back from requiring mandatory rotation of auditors means its proposals fall short of draft EU plans.
Under proposals made in 2011 by Michel Barnier (pictured), the EU's financial services chief, banks, insurers and listed companies would be required to rotate the audit firm they use every six years, with a four-year gap before the firm could be rehired. The rotation period could be extended to nine years if a company uses more than one auditor. (Bloomberg)