To break-up the Big Four’s dominance of the market – they currently audit 99 of the FTSE 100 – Grant Thornton has proposed an independent public body to lead auditor selection for large listed companies and other public interest entities (PIEs).
Jon Roberts, head of assurance at Grant Thornton, says this would be reassuring for both auditors and clients who can hold their heads high “from an independence point of view”.
He said the firm “wanted to go on the record and set out” its position on the key issues facing audit and that "the procurement side was more fixable in the short-term”.
Roberts pointed to the existing model for government authorities - Public Sector Audit Appointments.
The firm is also proposing that auditors of PIEs should not be allowed to do non-audit services, in order to “make it simple”.
“This all stems from trust and integrity, and what is in the public interest.
“The public interest is key, we think that the current definition is quite narrow, and we will be arguing for a examination of that. We’re seeking to bring in the interest of wider stakeholders – pensioners, employees, supply chain – in edition to the current definition around capital markets,” said Roberts.
When the discussion began in summer the firm felt like a “lone voice”, but he said it is now gaining more support. Roberts admits that it will take “quite a change in thinking” from the client side, while the Big Four have not responded either positively or negatively yet.
The Competition and Markets Authority is currently considering whether to launch its second review of the audit market. It has been a tumultuous year for the profession with heavy criticism of the Big Four and the large fees they received from collapsed construction group Carillion. Both the Financial Reporting Council and the firms were hauled in front of MPs to explain their roles.
The Carillion scandal also resulted in the on-going Kingman Review, conducted by the Department for Business, Energy & Industrial Strategy.
In response to the audit proposals from Grant Thornton, a CBI spokesperson said the organisation holds regular conversations with companies of all sizes across the sectors, covering a range of topics. “These include the future of the audit market, which is a vital foundation for trust in business,” they said.
“The CBI is discussing what these changes might look like with all relevant parties but – like many others – we are still forming a view on what the right solutions are to ensure the profession retains the confidence of the public, markets and regulators,” the spokesperson added.