The Big Four Face Challenge in Lords
BDO has come out openly stating that the Big Four have established their hold on the audit market so firmly that it has become very difficult for the small firms to thrive. BDO is a mid-tier firm and it made this revelation to the economic affairs committee of the House of Lords which is investigating the slackness in competition.
According to the report submitted by the BDO both the international as well as the domestic investors need more choice but due to the inherent difficulties of the market the new entrants are finding it difficult to hold good market shares. The companies are also looking for more choice but they too are not able to invest sufficiently because of the practical obstacles.
The report given by BDO stated that this supremacy of the Big Four did not affect the quality of the service provided by the audit companies but they did lead to an increase in the price. James Roberts, BDO partner, stated that audit appointments and the process of reviewing were the result of stakeholder engagements.
He also reiterated that the cost of auditing can be reduced considerably if the UK companies planned their audit requirements prudently. He said that curtailing audit costs was not a very difficult target to achieve. He gave the two most effective and simple measures to make this possible. He asked the companies to do away with the practice of having different audits for subsidiary companies and to increase the audit exemption limits.
James Roberts also pointed out that the role of audit and financial reporting was diminishing. He stated that the annual accounts these days have become peripheral in shareholding communications. As a result of this the entire procedure of financial reporting and audit needs to be reviewed.