In response to the Competition Commission’s final report on its statutory audit services market investigation published today.
“We welcome the Competition Commission inquiry, which has brought to a head the long running arguments and discussions over the structure of the UK audit market. We are already seeing a shift in the audit market as large companies seek to implement the FRC’s 10 year ‘comply or explain’ tendering process, announced last year, in support of the overarching principle of increasing investor engagement in corporate stewardship, including the appointment of auditors."
“The Competition Commission’s report will buttress the FRC’s work, albeit with a more stringent mandatory element. We will of course work with the relevant authorities to ensure that implementation of the Competition Commission’s remedies helps enhance investor confidence and visibility in the audit process.”
Tony Cates, EMA Head of Audit at KPMG, added: “We have always been supportive of measures which enhance the relevance and quality of audit. We believe that a 10 year tender process strikes a better balance between, on the one hand, allowing an auditor to get under the skin of complex, global businesses and provide real insight and management challenge while, on the other hand, ensuring an effective and rigorous tender process to choose the best auditor."
“Following the FRC’s announcement last year, we are already seeing most large companies detailing their tender plans in their annual reports. Whilst we continue to believe that the ‘comply or explain’ principle is an appropriate basis for UK corporate governance in that it provides discretion to audit committees, overall the final Competition Commission’s remedies complement the recent FRC changes which have resulted in stronger audit committee engagement, increased audit tendering, and more detailed audit committee and auditor reporting.”
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Notes to Editors:
About KPMG 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.