Frances Ball 19 Jul 2019 11:59am

Government to consult on CMA audit recommendations

Business secretary Greg Clark has emphasised that competition rules must be changed, during an announcement that the government will consult on the Competition and Markets Authority’s (CMA’s) recommendations

“Competition policy is one of the really powerful tools for improving the economic performance of firms,” Clark said in a speech at the Social Market Foundation yesterday.

Recent concerns raised about the quality of audit, Clark said, have “wide repercussions” for the performance of the rest of the economy.

The CMA called for a radical reshaping of UK audit in April, arguing for tighter regulation in a review that responded to high-profile company failures.

Most notably, the CMA called for an “operational split” of the Big Four’s UK audit arms.

Yesterday, Clark alluded to that recommendation, arguing that “we cannot run the risk of systemic over-reliance on just a few firms that could reduce further”.

He also pointed out that the sector could make changes within itself before legislation comes in, in a bid to improve quality organically – work that Clark would “strongly urge” firms to undertake.

Clark announced Sir Jonathan Thompson as the new chief executive of the Financial Reporting Council, which will become the Audit, Reporting and Governance Authority.

He then announced, “I am publishing our consultation on the CMA’s, in my view, powerful and compelling package of recommendations.

“I believe that we need to act fast before another audit scandal makes headlines. I don’t believe that we should wait for the review that I have asked Sir Donald Brydon to perform on the purpose of audit,” he added.

“Whatever the answer to that question, the mechanism to reach it will necessarily be delivered through a well-functioning market and strong regulator.”

The consultation launched today will run for eight weeks, and will seek views on recommendations made by the CMA. It will close on 13 September.