The Competition and Markets Authority (CMA) has opened an investigation into the audit sector amid growing concerns over the standards of statutory audits.
The study, which opened on 9 October, is set to look into the competitiveness and resilience of the sector following high profile crisis such as Carillion and criticism of those overlooking the firm’s books.
In May, the Work and Pensions and the Business, Energy and Industrial Strategy committees recommended that the CMA review the audit market and “explicitly” include consideration of breaking up the big four into more audit firms.
KPMG, EY, PwC and Deliotte all had a part to play in auditing Carillion, however, it was the latter two that came under fire for the way it dealt with the firm’s pension provisions.
CMA chairman Andrew Tyrie, said: “If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective.
“Sir John Kingman’s independent review of the regulator is a big step in the right direction. And the CMA will now examine the market carefully to establish what contribution more effective competition could make to improving audit quality.”
In its submission to The Kingman Review of the Financial Reporting Council, The Local Authority Pension Fund Forum branded the regulator unworkable and called for it to be broken up.
According to the CMA, it will examine three areas including choice and switching, resilience to failure and incentives around challenging performance reviews.
The CMA has written to the government outlining the study and the possible need for legislation in order to implement its findings.
The deadline for responses is 30 October.