Competition Commission: audit dominance by 'big four' hurts competition

The dominance of the Big Four accounting firms over corporate audits in Britain would probably lead to higher prices and lower quality, and keep clients from meeting the demands of shareholders', according to a regulator.

The situation does not help when it comes to making price comparisons and switching providers. The Competition Commission pointed out that 31 per cent of the UK's 100 biggest publicly traded companies had used the same accounting firm for the past two decades, in provisional findings from a 16-month probe of the industry.

According to the commission, too often auditors focused on meeting the needs of senior management who were key decision takers on whether to retain their services, which meant that competition focused on factors that were not aligned with shareholder demand.

The Big Four, KPMG LLP, Deloitte LLP, Ernst & Young LLP and PricewaterhouseCoopers LLP, were the subject matter of the regulator's inquiry. A similar EU effort is focused on the same companies in a bid to raise competition in the industry.

The probe had been called by a UK government committee investigating the global financial crisis. The companies had, in 2010, earned 99 per cent of the audit fees paid by the FTSE 100 companies.

According to the Competition Commission, the audit market had ''systemic'' issues that had led to a closed club of the Big Four accountants dominating the sector.