The regulator said PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG, which between them act as auditors of 90% of the UK’s stock-market listed blue chip companies, were also guilty of satisfying management and becoming less sceptical the longer their relationships with companies last.
It follows the launch of an inquiry by the Competition Commission into the audit market for the country’s top 350 listed firms. That project was partly prompted by a House of Lords investigation which found that listed companies, which must have their annual reports signed off by an auditor, use the same accountant for an average of 48 years.
Laura Carstensen, chair of the Audit Investigation Group, said: “We have found that there can be benefits to companies and their shareholders from switching auditors, but too often, senior management at large companies are inclined to stock with what they know.”
She said the group was looking into ways of encouraging competition in the industry, including mandatory rotation of audit firms and forcing companies to put their audit contract out to tender after a certain period.