UK: Choice in the UK audit market: FRC report and further consultation

The Financial Reporting Council has published Choice in the UK audit market: progress report and further consultation. In the associated press release, it is stated:

"The Financial Reporting Council has today published a discussion paper on the possible effects of changes to audit firm ownership rules, and a consultation on the use of audit firms from more than one network. The discussion paper and consultation form part of the FRC’s latest progress report on the recommendations of the Market Participants’ Group (MPG) on actions to enhance the efficiency of the market for audit services to large companies in the UK. The discussion paper considers a number of issues in relation to audit ownership, including:

• Ease of entry and the potential for mid-sized firms to gain market share
• The potential impact of the introduction of outside capital to audit firms on audit quality
• The impact of the introduction of outside capital on the supply of auditors with appropriate skills and personal qualities
• Possible decline in audit quality arising from conflicts of interest associated with a firm’s ownership"

For recent research looking at concentration in the UK audit market, see: Abidin, S., Beattie, V., and Goodacre, A., "Audit Market Structure and Choice: Further Evidence from the UK", January 2008, available on SSRN here.