This week, the Business, Energy and Industrial Strategy (BEIS) committee, which Reeves chairs, launched an inquiry into the audit market.
The purpose of the inquiry is to ensure that results of both the Competition and Markets Authority and Kingman reviews are acted on.
The committee is to call on all major stakeholders in the audit sector - including the Big Four, ICAEW, the Financial Reporting Council (FRC), FTSE 350 CFOs, investors and outside experts - to give evidence in January next year. This will be after the findings of both the CMA and Kingman reviews have been published.
Speaking at ICAEW headquarters on Monday, Reeves, said that the “audit market is broken” and that the collapse of Carillion earlier this year, which prompted strong criticism of the profession, implicated the entire audit industry.
“The Big Four’s overwhelming market domination has failed to deliver audits which are fit-for-purpose,” Reeves said.
“The lack of meaningful competition has bred conflicts of interest at every turn. The dice are loaded in the Big Four’s favour, as they snap up audit contracts while pocketing huge fees for consultancy work and providing advice on recovering failing businesses.
“A host of solutions are now proposed to boost competition and improve audit quality. It’s important that all options are on the table, including measures to break the stranglehold of the Big Four."
Reeves welcomed the current inquiries by the CMA and Sir John Kingman but added that too often in the past corporate and regulatory failures were followed by reviews which have then been left to gather dust rather than result in concrete action.
“Our committee’s inquiry on the future of audit seeks to ensure these reviews are acted on swiftly and effectively and that they genuinely deliver the improvements to audit quality and corporate governance which businesses, investors, pension-holders and the public expect.”
Reeves also criticised the FRC for being “toothless and passive” despite its tougher stance this year.