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FRC 'may be handed competition role'

03/07/13

The Financial Reporting Council (FRC) could be called upon to challenge competition levels in the blue chip accounting market, taking on the Big Four domination of PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young and KPMG.

This would place it in a similar position to Ofcom, which has a responsibility to police the standard of competition in the communications sector while carrying out its other regulatory duties.

Reuters reports that the Competition Commission outlined in February its potential "remedies" to make it easier for the next tier of accountants like Mazars, Grant Thornton and BDO to pick up more business.

One factor for this shift in thinking could be concerns that PwC and its counterparts have become too close to their clients, especially those within the banking sector.

"The further proposed remedy we are considering is to give the FRC a secondary duty to promote competition between firms providing audits to the FTSE 350 companies," the Competition Commission said in a statement.

However, it is expected to launch another tranche of measures aimed at shaking up the UK's "sticky" audit market next month.

The FRC's audit checks could help companies and shareholders better assess the quality of service they are getting, potentially encouraging firms to switch to another company if they feel they are being short-changed by their current provider, according to the comission.

A precedent for this move was set by the the choice to give the new UK Financial Conduct Authority, which protects consumers, a secondary requirement to promote competition in financial services.

Similarly, the FRC would not have the power to directly challenge market structures, but would adopt a less direct and more advisory role.

The FRC recently published guidance encouraging UK auditors to be more sceptical when it comes to examining the books of businesses, warning against pliancy or avoiding minor mis-statements.

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