* Firms should tender for accounting work every 10 years
* Had previously considered demand to tender every 5 years
* EU likely to go step further with mandatory auditor change
By Huw Jones
LONDON, Oct 15 Britain has pulled back from
accounting reforms that would have forced top companies to
change book-keepers every five years, putting its regulators
potentially at odds with tougher reforms likely to be introduced
across the European Union.
The reforms are part of a regulatory clampdown following the
2007-09 financial crisis, because auditors had given banks a
clean bill of health just before many had to be rescued by
Critics have also said the "Big Four" accountancy groups
have developed too-cosy relationships with top company
executives and there has not been enough competition in the
Under proposals released on Tuesday by the UK Competition
Commission, the top 350 UK companies would be forced to put
their book-keeping out to tender at least once a decade, to
shake up a market dominated by KPMG,
PricewaterhouseCoopers, EY and Deloitte &
But the changes which would take effect from the final
quarter of 2014 row back on an earlier draft recommendation that
would have forced companies to re-tender their audit work every
The watchdog, whose investigation had been launched in
October 2011, had faced opposition from companies and investors,
worried about the cost and disruption of very frequent
The sector's regulator, the Financial Reporting Council
(FRC), had also wanted more time for its year-old rule requiring
firms to consider re-tendering at least once a decade to work -
a rule that PwC said had already helped prompt 24 of the top 350
companies to re-tender in the past year.
KPMG also said 10 years struck a better balance.
"Our measures will deliver lasting change in a market where
currently a major company putting its audit out to tender
remains unusual enough to be a news story," said Laura
Carstensen, who chaired the Competition Commission's probe.
The competition watchdog shied away from a much tougher
option: forcing companies to change their accountant on a
regular basis, a step the European Union is likely to introduce
in any case.
It also stopped short of restricting non-audit services like
consultancy work, an area where the EU may cap fees.
David Barnes, managing partner at Deloitte UK, said the
audit market had changed since the competition watchdog began
its probe two years ago, with more tenders taking place.
"While this does provide clarity in the UK audit services
market, there will be some uncertainty until the position in
Europe is finalised," Barnes said.
Middle-tier accountants such as Grant Thornton, Mazars and
BDO have looked to regulators to prise open the market and BDO
senior partner James Roberts said some may regard the actions
being taken as less radical than many would have hoped.
"We are under no illusion that, despite the investigation,
the establishment of real and sufficient competition is a
long-term undertaking," Roberts said.
David Herbinet, a partner at Mazars, said the reforms would
prise open a once "ossified" market, though not overnight, while
Grant Thornton said it would help it commit to investing.
Many top firms have kept the same accountant for decades,
with PwC having audited two banks, Barclays and Lloyds
, for more than a century.
So far, the high-profile changes in accountants have been
among the Big Four rather than allowing other firms a look in.
"This is a missed opportunity to give the largest listed
audit market the shake up it badly needs," Michael Snyder of
Kingston Smith accountancy firm said.
While ceding ground on re-tendering, the competition
watchdog confirmed a draft recommendation that the FRC should
review the audit engagement for each of the 350 companies on
average every five years, a heavy undertaking for the regulator.
The FRC should also expand its remit to include competition
as an objective, confirming a recommendation made at the draft
stage which had also raised concerns at a regulator with modest
Michael Izza, chief executive of accounting body ICAEW, said
it was regrettable the competition watchdog had not simply
endorsed the FRC's voluntary approach to re-tendering.
Some Big Four officials have come round to seeing the
benefit of a likely EU law requiring a change in auditor,
probably every 15 to 25 years, for the certainty that would
"Bring it on," said one, adding that a mandatory switching
period would make it easier to plan ahead and more worthwhile to
take part in a tender knowing the incumbent could not retain the