On Wednesday, a parliamentary report from Britain called for an investigation by the nation’s competition authorities to learn why the “Big Four” auditing firms did not warn supervisors regarding banks before the financial crisis hit. The four are PwC, Deloitte, Ernst & Young and KPMG.
According to a Reuters report, the House of Lords issued a report that questioned the lack of warning before the crisis, and alleged that auditors failed in their responsibilities. "The Big Four's domination of the large firm audit market in the UK is almost complete: in 2010 they audited 99 of the FTSE 100 largest listed companies, which change auditors every 48 years on average," the report said in part. It went on to say, "It is clearly an oligopoly with all the attendant concerns about competition, choice, quality and conflict of interest. It gave no warning of the banking crisis."
The report asked the Office of Fair Trading to investigate the audit market and keep in mind the potential for a deeper investigation by the Competition Commission, which is more powerful.
John MacGregor, chair of the panel that issued the report, was quoted as saying, "We feel it does need a broader, more sustained thorough look."
Regulators are concerned about a lack of competition in the field as well, regarding it as an urgent issue, since if one firm displayed instability it could lead to problems similar to those that occurred in the wake of the collapse of auditing firm Arthur Andersen. The board of the Office of Fair Trading will meet on April 7 to consider investigating whether the insistence of banks that companies seeking loans must be audited by one of the Big Four consists of entrenchment of those auditing firms.
The European Commission (EC) is scheduled to bring out legislation in November to increase competition within the auditing sector.
The report blamed auditor complacency for contributing significantly to the financial collapse, and said, "Either they were culpably unaware of the mounting dangers, or, if they were aware of them, they equally culpably failed to alert the supervisory authority of their concerns."