UK big four accountants may face Competition Commission enquiry

The big four audit firms in the UK – KPMG, Ernst & Young, Deloitte and PricewaterhouseCoopers (PwC) - may be  investigated by the Competition Commission with the Office of Fair Trading saying there were "reasonable grounds for suspecting that there are features of the market that restrict, distort or prevent competition".

Clive Maxwell, executive director of the OFT, said, "We have been concerned for some time about the extent of competition in this market, with only four large players and substantial barriers to entry and switching." According to the OFT, it would talk to regulators, government, business and the audit industry on whether to refer the market to the commission over the next few weeks followed by a statutory consulation later in the year.

KPMG, Ernst & Young, Deloitte, PwC last year audited 99 firms in the FTSE 100 index. A parliamentary report in March, said blue-chip companies changed auditors only every 48 years on average.

The develpment follows the House of Lords economic affairs committee observation that OFT should review the four practices even as concerns were raised about their complacency contributed to the financial crisis.

Certain banks only lend to companies that have been audited by one of the big four.

The OFT said, "The OFT has been concerned for some time that the market for external audit services to large firms in the UK is highly concentrated, with substantial barriers to entry and switching."