Gov’s managed audit plan faces challenger firm shun

Published on June 12, 2021

BDO and Grant Thornton are both reportedly considering not pitching for shared audits

The government’s managed shared audits plan for FTSE 100 companies has been met with queries from two of the largest challenger firms.   Both BDO and Grant Thornton are considering not pitching for shared audits, resulting in the possibility of FTSE 100 companies being unable to find smaller accountancy firms to work on their audits. Ministers had introduced the shared audit idea in an effort to break the Big Four firms’ auditing dominance over the UK’s largest companies by ensuring a smaller rival had checked the accuracy of a group’s accounts. Currently, the Big Four audit the entire FTSE 100 and over 90% of the FTSE 250, while BDO and Grant Thornton pull in audit fees of more than the next 14 challengers combined. In turn, one senior auditor at a large challenger told the Financial Times that if the plan is shunned then large companies would be forced to turn to “smaller firms that should not be anywhere near this”. Scott Knight, UK head of audit at BDO, said: “We have been vocal for years on the need for reform in the audit market. We will work with whatever market intervention the government puts in place and will be active in making it as successful as possible. “We have acted for FTSE 100 businesses before and would continue to do so if the fit was right with our expertise and skills.” He added: “However we will not jeopardise audit quality or our reputation by overreaching and taking on audits where we don’t have the capability and capacity to achieve the highest standards of work. “Audit quality will always come first in our decision-making on pitching for new business regardless of where the company sits.” As a part of the government’s plan due to hit public consultation in July, smaller accounting firms would have to carry out 10% to 30% of a FTSE 350 company’s audit alongside one of the Big Four. However, Fiona Baldwin, UK head of audit at Grant Thornton, said that shared audits are only attractive to challengers “as long as the share of the audit is meaningful”. She added that if the challenger only gets “what’s left at the bottom of the barrel, that’s not interesting and doesn’t help”.

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