Gavin Hinks, Accountancy Age, Wednesday 29 September 2010 at 10:32:00

Grant Thornton calls on regulator to intervene in audit market

Grant Thornton is calling for direct regulatory intervention in the auditmarket that would limit the number of audits a firm could hold among publiccompanies.

The call comes in a submission to the House of Lords economic affairscommittee which is conducting an inquiry into the dominance of the Big Fourfirms and constitutes the most emphatic public demand yet for regulators todirectly intervene in the market.

Among the other proposals made by Grant Thornton are a code of conduct forinvestors urging them to promote the use of auditors outside the Big Four. GrantThornton also wants to see the "prohibition" of so called restrictive covenants- clauses placed by banks in credit agreements insisting that only Big Fourfirms be used on an audit.

Grant Thornton's submission says: "The soft touch initiatives by the FRC havedemonstrably not worked. While there is no silver bullet , we believe thatregulatory intervention could achieve meaningful changes in the structure of theaudit market to widen and deepen participation beyond just four firms over, say,a five year period."

The August 2010 Hemscott report shows that the Big Four have all the FTSE-100audits except one, Rand Gold Resource, which is undertaken by BDO. In theFTSE-250 all but 10 of the audits are Big Four appointments. The Big Four alsodominates the Small Cap or fledgling market. The AIM market is the only onewhich sees significant competition to the Big Four from Grant Thronton and BDOalong with Baker Tilly.

Grant Thornton's submission was signed by chief executive Scott Barnes.

Yesterday, Accountancy Age revealed that John Griffith Jones, the head ofKPMG, had called for a new protocol governing the relationship between auditorsand regulators on the exchange of information.

Read more:

TheHouse of Lords Inquiry

JohnGriffith Jones response to House of Lords

Auditmarket fiercely competitive, Deloitte says