Huge changes could be on the horizon for the UK’s largest accountancy firms as Michel Barnier, the European Union Internal Audit Commissioner, looks to shake up the European Audit Market with some radical reforms.
Historically, the Big Four accountancy firms PWC, Deloitte, KPMG and Ernst & Young have dominated the audit marketplace, but following the financial crisis, the auditing market has taken much more of a high profile position in the accounting industry. A new proposal from the European Commission seeks to increase competition by restricting certain service operations and by introducing compulsory rotation of auditors and joint auditing.
Critics of the new proposal argue that restricting firms from carrying out lucrative non-audit services with low-margin audit work will have a huge impact on service quality and long standing client relationships. Furthermore, smaller firms may not wish to take the risks and be held accountable due to the strict regulation that comes with the territory. Joint auditing could involve a cost increase and is not without its complications including data sharing and firm compatibility.
Could the new restrictions even cause the break up of these dominant firms, and /or break off smaller accountancy firms to form as frustrated partners shun restriction and take their clients elsewhere?
The new plans are due for publication on November 30th – what’s your view?