Institute responds to second CMA consultation on UK statutory audit

Feb 07, 2019

As reported previously in Chartered Accountants News, the UK Competition and Markets Authority (‘CMA’) commenced in October 2018 a study of the UK statutory audit market, aimed at enhancing market choice, competition, quality and resilience.  The CMA issued for consultation an update paper in December 2018, which included a revised package of proposals, including:

  1. Regulatory scrutiny of auditor appointment and management with a view to securing audit committees’ accountability and independence;
  2. Mandatory joint audit with a view to breaking down barriers to non-Big Four firms;
  3. An operational split between the audit and advisory businesses of audit firms, aiming to address identified conflicts between the provision of audit and non-audit services while mitigating against some of the key negative consequences of alternatively introducing full ‘audit-only’ firms; and
  4. Peer review of audits prior to the opinion being signed.

Chartered Accountants Ireland responded to the CMA consultation last week.  Some of the key points raised in our response include:

  • Support for proposed measures, properly resourced, that would enhance the support provided by the audit regulator to the work of audit committees;
  • The need for further detailed evidence based analysis and consultation on appropriate frameworks to support a proposal to implement either joint audit and/or market share cap measures;
  • Appropriate revision to the auditor liability regime  should the mandatory joint audit proposal be implemented;
  • The Institute does not support a full structural split of audit firms and considers that there is insufficient evidence based analysis available currently to support a proposal of an operational split; and
  • Very significant concerns as to how peer review of audits by other firms in advance of signing audit opinions could be introduced in a workable/practicable given current corporate reporting timelines, including potentially increased risks to audit quality.

The full Chartered Accountants Ireland submission is available on our website and can be accessed by clicking here.