On April 18, 2019, the United Kingdom’s Competition & Markets Authority (CMA) issued its final report, Statutory audit services market study, recommending a “shake-up” of the UK audit market. Click here for full details. The report updates its previous paper (of the same name), released in December 2018.
In summary, the CMA is recommending:
1 – Audit (or similar governance) committees should be more accountable for audit quality and oversight of the auditor and there should be robust regulatory oversight of the committee’s auditor selection process.
2 – Mandatory joint audits (one big 4 plus a non-big 4 firm) to increase capacity and choice in the market and improve audit quality. The largest, most complex companies will be exempted initially, as will companies that choose a non-big 4 firm as its sole auditor.
3 – Operational split between the big 4 firms’ audit and nonaudit practices to reduce conflicts within firms and drive greater focus on audit quality (possibly expanded to other firms later).
4 – Regulatory review (by the new regulatory body) of the progress made by these initiatives in five (5) years (post-full implementation) to determine whether further reforms are needed.
The report suggests that the Secretary of State move forward with the recommendations at the earliest opportunity.