Last week, the Competition & Markets Authority (CMA) released its final report, concluding its investigation into the UK audit market. The report recommended some major reforms “to address serious competition problems in the UK audit industry”.
The study, which was initially launched in October 2018, gave stakeholders an opportunity to comment on a list of proposed reforms to the audit market. The CMA received 95 responses to its update paper and 75 responses to its invitation to comment from audit firms, companies, academics, lawmakers, and other interested groups and individuals.
Using data gathered by Audit Analytics to analyze audit fee and auditor tenure trends, as well as to project the upcoming major audit tenders, the CMA proposed a three-pronged approach to audit reform which was submitted to the Rt Hon. Greg Clark, MP, Secretary of State for Business, Energy, and Industrial Strategy on April 18, 2019.
- Recommendation 1: Audit Committee scrutiny
- Recommendation 2a: Mandatory joint audit and peer review
- Recommendation 2b: Measures to mitigate the effects of the distress or failure of a Big 4 firm
- Recommendation 3: An operational split between the audit and non-audit practices of the Big Four
Although these proposals are expected to be implemented immediately, they will progress gradually and receive a five-year review of their effectiveness.
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