Reuters: Regulatory News: UK watchdog opposes compulsory accountant switching

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UK watchdog opposes compulsory accountant switching Mar 19th 2013, 14:49 LONDON, March 19 | Tue Mar 19, 2013 10:49am EDT LONDON, March 19 (Reuters) - Forcing companies to switch accountants to boost competition in a market dominated by the "Big Four" could damage the quality of financial reports, Britain's audit regulator said on Tuesday. Last month the Competition Commission proposed a number of initiatives to increase choice of accountant. One of the proposals, to force companies to change their accountant every few years, could have an adverse effect on audit quality and artificially constrain businesses' choice of audit firm, the Financial Reporting Council said in a statement. The FRC's position will be welcomed by the Big Four - PwC, KPMG, Ernst & Young and Deloitte - which check the books of nearly all blue chip companies across the world and which oppose mandatory rules. The watchdog, which can fine auditors that breach its rules, has just introduced a requirement for firms to consider changing their accountant at least every decade, but on a voluntary basis, explaining why if no change is made. But the Competition Commission has also proposed compulsory tendering by companies for auditors every few years to shake up what it calls a "static" market so that smaller auditors outside the Big Four have a chance to get work with blue chip clients. The FRC said its voluntary "comply or explain" approach more appropriately recognised the role of investors in key decisions on how a company is run. FRC Chief Executive Stephen Haddrill said the watchdog's new voluntary rule on tendering for auditors and on giving audit committees at companies more responsibilities were making a difference. "We are keen to discuss with the (Competition) Commission the case for further steps once there has been sufficient time for these changes to take full effect," Haddrill said. The final outcome will depend on what happens at European Union level where a draft law which proposes mandatory accountant switching is being scrutinised. If approved, Britain like other EU member states, would have to comply whatever UK regulators decided in the meantime. Link this Share this Digg this Email Reprints

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