Auditors: Market concentration and their role - Economic Affairs Committee Contents

Supplementary memorandum by Mr David Herbinet, Mazars (ADT 48)

  I thought it may be helpful if I followed up on Questions 135 and 136 from Lord Forsyth of Drumlean concerning the audit market in France.

  An independent review carried out in the UK on the audit market indicated that more than 70% of FTSE 100 companies had not held a competitive tender for at least 15 years (in some cases it may, of course, be for a considerably longer period). By contrast over 50% of CAC 40 participants in France have put their audit out to tender in the last five years.

  In the FTSE 250 in the UK just 4.4% are audited by a non-Big Four firm. This compares with France where in the case of the largest 2010 listed companies outside the CAC 40 80% are audited, in a joint audit capacity, by a non-Big Four firm. Moreover, 101 audit firms are involved in these audits in France which enables them to gain exposure to the listed company audit market and, if they choose to invest, they can do so in order to build a bigger market share.

  The key lessons we would draw from the above analysis are that joint audit has enabled firms to compete and establish themselves in the audit market for large listed companies and that fair and regular tendering is essential if non-Big 4 firms are to build their market share. Joint audit facilitates regular tendering since if the mandates of the joint auditors are reviewed at different times one firm can be changed whilst the other remains in office.

  If you would like to discuss the above, or any other points, please do not hesitate to contact me.

17 November 2010

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