Competition Commission audit reforms — not as strict as first anticipated
The Competition Commission (CC) has been concerned about the lack of competition in the audit market for some time. It reports that this lack is due to factors that inhibit companies from switching auditors and the incentives auditors are having to focus on satisfying management rather than shareholder needs. The CC Final Report (published on 25 October 2013) confirms the CC position that all FTSE 350 companies must put their statutory audit engagement out to tender at least every 10 years — no company will be able to delay beyond 10 years.
This is a retreat from the previously contentious position that audit contracts should be tendered every five years. As a compromise, the CC has confirmed that companies should consider going out to tender every five years and if they choose not to at that time the Audit Committee will be required to report the year it plans to conduct the tender and confirm why that is in the best interest of shareholders…
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