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Big Four accused of dereliction of duty

Big Four accused of dereliction of duty

The Big Four’s domination of the audit market came under threat last week when the House of Lords recommended a detailed Office of Fair Trading investigation.

This investigation would be the first time the Big Four have been investigated since a full scale competition investigation was discounted in 2002, following the collapse of Arthur Andersen.

The regulators also came under fire as the House of Lords committee slammed both groups for dereliction of duty and said the breakdown of communications between regulators and auditors compounded the financial crisis.

Box-ticking International Financial Reporting Standards were in the limelight and the Lords recommended that caution should once again become the guiding principle of audit.

The economic affairs committee has now published its report on the eight-month investigation into the UK audit market. The inquiry said that large firms are limited in their choice of auditors because of the oligopoly of the Big Four. Last year, they conducted the audit of all but one of the FTSE 100 organisations and these large companies tend to stick with the same auditor for an average 48 years.

The report went on to point out that there is a risk of one of the firms dropping out of the audit market and this would lead to an unacceptable level of market concentration.

The committee recommends, amongst other things, that companies in the FTSE 350 must put their audit contract out to tender every five years and that external auditors are banned from giving internal advisory services and advice to the risk committees of firms they audit.

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Image: September is the time of baseball magic by kevindooley

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