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


In response to the Call for Evidence in the matter of Auditors: Market concentration and their role, I would like to submit these few probably unoriginal thoughts.

I would say, however, that they date back to my experience as a non-executive director and member of audit committees in the 1990s and early 2000s in Sears Group, British Telecom and BET.

At that time I became concerned that in all three companies the audit fees were becoming a smaller amount than the fees from consultancy work, much of which was won because the auditors' knowledge of the company enabled them to make better informed proposals for such work at lower prices than other would-be contractors.

That caused me to become of the opinion that the auditors were increasingly concerned not to irritate executive directors by making criticisms of accounting practices lest they might lose not only the audit contract, but the far more lucrative consultancy work.

My conclusion is that the answer to your Question 6 is self-obviously "No—auditors were not sufficiently sceptical in bank audits". However, I do not think lack of competition was the cause—rather was it fear of losing consultancy income? On Question 10, I think it might be prudent to limit consultancy income in relation to audit income of a client company.

6 January 2011

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