Taking on the Big Four accounting firms will remain a lengthy and costly challenge for smaller rivals in Britain despite the regulatory leg-up unveiled, but France has shown it can be done over a decade.
The Competition and Markets Authority (CMA) has ordered that Britain’s top 350 listed companies must hire two auditors to loosen the grip of EY, KPMG, Deloitte and PwC that individually check the books of all but nine of those companies.
It forms a package of measures from the CMA aimed at improving audit quality and restoring trust after accounting failures at construction company Carillion and retailer BHS.
Though the changes are likely to take some time to make it into law, joint audits in France have enabled smaller rivals like Mazars to work alongside the Big Four and win the confidence of bigger clients.
They also feature in Sweden and Spain, but were ditched in Denmark due to the higher cost, with estimates ranging from about 20 percent to far higher.
“We know it works and we know it will work in Britain and will create a markedly different market that is much needed,” said David Herbinet, the London-based global head of audit at Mazars.
According to the International Accounting Bulletin (IAB), Deloitte earned $43.2 billion globally in audit and consultancy fees in 2018 – a fifth of the market – while PwC earned $41.9 billion, EY $35 billion, and KPMG $29 billion.
