CMA to probe audit sector amid concerns about 'big four'

The Competition and Markets Authority has announced plans to investigate the audit sector amid growing concerns about the dominance of the 'big four' - KPMG, Deloitte, EY and PwC - particularly after the collapse of construction group Carillion sparked criticism of its auditors.

The competition watchdog said on Tuesday that its study will focus on three main areas: choice and switching, resilience and incentives.

It argued that while changes put in place by the Competition Commission appear to have strengthened competition between the big four firms, the largest UK companies still turn almost exclusively to one of them when choosing an auditor to go over their books.

In addition, the CMA said the market study will examine what the role of the big four firms means for resilience, the risk being that each of the main four auditors is "too big to fail", potentially threatening long-term competition.

Finally, it will examine concerns about the fact that companies, rather than their investors, pick their auditor.

Chairman Andrew Tyrie said: "If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective.

"Sir John Kingman’s independent review of the regulator is a big step in the right direction. And the CMA will now examine the market carefully to establish what contribution more effective competition could make to improving audit quality.

The CMA's chief executive, Andrea Coscelli, said it plans to "move swiftly" and issue provisional findngs before Christmas.