ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

CMA launches immediate review of audit sector

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Anne Adrain, Head of Sustainability and Assurance

12 October 2018

Key points

  • The CMA has announced plans to examine the UK audit sector in response to concerns about how the audit market functions.

  • The CMA study has identified five themes but will focus on three of them.

  • The evidence from the review will enable the CMA to scrutinise potential solutions.

The Competition and Markets Authority (CMA) has launched a detailed study of the UK audit sector to examine concerns that it is not working well for the economy or investors.

The scope of the market study will be the supply of statutory audit services in the UK to large companies, both listed and private, and public interest entities (PIEs). It is unclear at this moment whether the reference to the term ‘large’ is in line with the definition of a large company in the Companies Act 2006.

As part of its review, the CMA will investigate whether the sector is competitive and resilient enough to maintain high-quality standards. They plan to issue their provisional findings before Christmas.

The move by the CMA comes amid growing concerns and criticism of auditors following recent corporate collapses, and poor results from the Financial Reporting Council (FRC) audit quality reviews.

The CMA identified five themes from the concerns that it has heard from stakeholders so far as well as the Competition Commission’s report in 2013 and its initial view of how the market functions. It aims to focus on three of these:

  • Market choice - Changes put in place by the Competition Commission appear to have increased competition between the big four firms - Deloitte, KPMG, E&Y and PwC – but the largest UK companies still almost exclusively use one of them when selecting an auditor.

  • Resilience - The market study will examine what the role of the big four firms means for the resilience of the audit market with the risk being that each of the big four auditors is “too big to fail”, potentially threatening long-term competition.

  • Incentives - Companies, rather than their investors, select their auditor. The CMA’s work will examine whether that this results in a lack of incentive to produce challenging performance reviews.

In addition to the above, the CMA also identified two other themes, namely: the scope and purpose of the audit; and regulation of audit in the UK. However, it does not intend to focus on these because the former is furthest from its focus and expertise in the operation of markets, and the latter is to be addressed by the ongoing review of the FRC led by Sir John Kingman.

If the CMA finds evidence that the market is not working well after examining these areas, it will scrutinise all proposals for tackling them.  It has, on a preliminary basis, identified three groups of measures which it believes are likely to hold the most promise in addressing the issues it has identified. These groups of measures could seek to:

  1. increase competition between the Big Four, for instance, by creating audit-only firms or placing  greater restrictions on the other services that they can provide;

  2. increase competition from non-Big Four audit firms, for instance, through a market share cap and/or joint/shared audits; and/or

  3. address the incentives arising in audits, for instance, by moving responsibility for appointing  auditors away from audited companies, in certain circumstances, to an independent body

Whilst the CMA acknowledges that one potential solution to increase choice and resilience would be to forcibly break-up the Big 4 firms, it acknowledges that the design and implementation of this measure would pose significant and potentially insurmountable challenges.

The CMA has written to the government about its market study and the possible need for legislation to implement its findings and those of the independent review of the Financial Reporting Council led by Sir John Kingman.

Bruce Cartwright: Audit debate off and running

By Bruce Cartwright CA, ICAS CEO

10 October 2018

The critical question in the audit debate

By Bruce Cartwright CA, ICAS CEO

8 October 2018

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: