A group of companies and organizations in the United Kingdom has responded to the Financial Reporting Council's report on constraints in the audit market that have forced most large public companies to rely on one of the Big Four accounting firms for audit services.
The report noted that companies are often pressured by their banks to turn to the Big Four for audit services before a loan is granted. The Association of Corporate Treasurers said in its response to the report, "This should not extend to banks requiring restrictive covenants or contractual terms with respect to the appointment of audit firms unless, after proper consideration, there are demonstrably good reasons for it."
The FRC hopes to give companies more of a choice of auditors and reduce the uncertainty and costs of an audit firm suddenly leaving the market, as happened when Arthur Andersen collapsed in the wake of the Enron debacle.
Some companies have recommended that smaller audit firms merge together to create stronger competition for the Big Four. But PricewaterhouseCoopers expressed skepticism in its response to the FRC report. "We have very real doubts as to whether the top end of the audit market is able to support more than one additional audit firm, given that our own merger, and indeed those that preceded it, resulted in large part from the fact that the market simply could not support the number of firms then vying for business in it," said Robert Kaufeler, secretary to PwC's management board.
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