In response to the Competition Commission’s provisional decision on remedies, announced today, Simon Collins, UK Chairman of KPMG, commented:
“We welcome any measures that have the potential to enhance audit quality. The UK Corporate Governance Code and the recent changes made by the Financial Reporting Council (FRC), which require companies to tender their audit every 10 years on a “comply or explain” basis, have very strong support from the audit profession, businesses, trade bodies and investors alike. We are already seeing these efforts taking effect, with many companies reviewing their audit relationships and putting the audit out to tender.
“We believe that the Competition Commission’s provisional decision mandating companies to tender their audits every five years, not only undermines the fundamental “comply or explain” principle of UK corporate governance, but also gives rise to a substantial incremental cost - far higher than the estimated £30m – and could have a highly disruptive effect on business.
“We continue to believe that the audit market functions well from a competition perspective and that the AECs alleged by the Competition Commission are not supported by the facts.”
Tony Cates, UK Head of Audit at KPMG, went on to say:
“Large, global companies are inescapably complex; when these businesses put their audits out to tender it creates a substantial burden and the process can take up to two years of preparation. The Competition Commission has not established that moving beyond the UK Corporate Governance Code to even more regularly tendered audits brings increased benefits.
“Five year audit tendering will feel relentless to many companies, audit committees and investors who may only see audit quality damaged rather than improved, with the possible end result that the process of tendering becoming an empty box-ticking exercise, rather than a more meaningful, engaged exercise on a ten year basis.”
- ENDS -
Sorrelle Cooper, Senior PR manager, KPMG
T: +44 20 7694 8527
M: +44 7932 078218
KPMG Press office: +44 (0) 207 694 8773
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.