Institute responds to UK CMA consultation on the statutory audit market

Nov 16, 2018

Chartered Accountants Ireland, in its capacity as a Recognised Supervisory Body (RSB) in the UK, responded recently to the consultation issued by the UK Competition and Markets Authority (CMA) on the statutory audit market.

The CMA consultation was structured around five main themes – (1) Scope and purpose of audit, (2) Initiatives, (3) Choice and switching, (4) Resilience of the audit market, and (5) Regulation of audit in the UK, focussing primarily on themes (2) to (4).  The consultation paper contained a wide range of potential measures including further restrictions on non-audit services, audit-only firms, break up of the Big Four firms, independent bodies responsible for appointing auditors to companies and a national audit office style approach to statutory audit. 

The Institute’s response can be read in full by clicking on this link  It addressed the individual measures proposed in the consultation paper and some of the key points included:

  • Given the importance of the issue, we have called for a much more in-depth, detailed and evidence based consultation is necessary to allow all stakeholders to provide considered responses. Many of the proposed measures are untested, whereas there may be evidence available to the CMA and other stakeholders on certain other potential measures in other jurisdictions.
  • The CMA consultation is not operating in isolation and we stated that it needs to be coordinated with other processes, such as the Kingman FRC review in the UK, the Monitoring Group consultation on the future of international audit standard setting, recently implemented EU changes with regard to statutory audit in the European Union and changes to corporate reporting requirements, such as the viability statements, in the UK.
  • We consider that there is merit in more detailed consideration of further restrictions on the provision of non-audit services to PIE audit clients. In considering such measures, it would be critically important to clearly distinguish audit-related services which must be undertaken by the auditor from non-audit services which may be provided by any professional accounting firm.
  • We consider that there may also be merit in further detailed consideration of joint and shared audits, and such consideration should incorporate evidence available internationally.
  • We also see merit in some but not all of the proposals addressing greater transparency in the tendering process, and further than public interest entities themselves could be encouraged to provide more transparent reporting with regard to their own tendering processes and the governance of those processes.
  • We consider that there are significant challenges to be overcome in pursuing proposals regarding market share caps.
  • We do not support inter-alia proposals to have audit-only firms, to have statutory audit appointments handled by an independent body or that statutory audits be undertaken by an ‘NAO-style’ national auditor.

Economia, the ICAEW’s member publication, has written an article with a high level comparison of the views of the UK RSBs, including Chartered Accountants Ireland, on the individual measures proposed.  Please click here to access the Economia article.

We look forward to engaging with further consultation on this very important topic.  The CMA consultation paper can be accessed at this link.