A study commissioned by the United Kingdom's accounting regulator and the U.K. Department of Trade and Industry said that the dominance of the Big Four is not healthy for competition and prevents small and midsized firms from gaining entry into blue-chip clients.

The study, "Competition and Choice in the U.K. Audit Market," considers several factors that contribute to the competitive environment for audit services to the U.K.'s large public companies. Conducted by independent consulting firm Oxera, the study is based on research involving audit committees, companies, firms, investors and regulators.

Among the findings:

  • 97 percent of the largest public companies are audited by one of the Big Four firms;
  • Many large companies said that they had an effective choice of only two or three audit firms, and in a small number of cases, companies may have no effective choice of auditor in the short term;
  • Barriers to entry into the market for the major audit jobs are high;
  • New entrants into the market would need to overcome perception barriers and demonstrate sector-specific skills, international coverage and high-quality staff to win audits; and,
  • The loss of a Big Four firm could lead to serious problems for some companies and a loss of investor confidence.

The chief executive of the regulatory Financial Reporting Council , Paul Boyle, said that his group is planning a w ider look into addressing some of the public interest issues arising from the existing competitive environment . The study is available off the FRC's Web site, at www.frc.org.uk/press/pub1083.html.

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