6 June 2017

Prof Jubb comments on the difficulties of an auditing market dominated by the Big Four in article titled 'Auditor merry-go-round fails to shake-up cosy market'.

Guy Jubb, Honorary Professor of the University of Edinburgh’s Business School’s Centre for Accounting and Society and former Head of Governance at Standard Life, has featured in a Financial Times article. It focuses on the role and dominance of the Big Four (EY, Deloitte, KPMG and PwC) accountancy firms in the audit market.

The article explores the fact that there have been some recent high-profile accountancy scandals (such as Rolls-Royce and Tesco) involving the Big Four, yet due to lack of competition, there are few opportunities for FTSE 350 companies to select anyone else. An introduction of new regulation happened in 2011 with the intention to increase competition and promote opportunities for new firms to enter the market. The new requirement is that companies should tender for their audit every decade, and change auditor every 20 years.

Between the four firms, however, they currently audit 98% of FTSE 350 companies. Further, latest market share statistics show that the big four audit 99 of Britain’s 100 biggest listed companies.

Prof Jubb’s comments in the article state: "it’s very clear that tendering has done nothing to improve choice." Furthermore, should one of the big four have “a crisis of confidence and go into meltdown, because of serious audit quality or reputational issues, you (could) find yourself going rapidly from the big four to the big three,” and that “it’s a very uncomfortable position”.

To read the full article and see insights from other leading thinkers, visit the Financial Times website: