Jeremy Newman of BDO Stoy Hayward, highlights a key finding of the British Oxera Report on Audit Choice and Compe­tition:

According to the report by Oxera on Compe­tition and Choice published in April 2006 more than 70% of FTSE 100 companies had not held a compet­itive tender for the last 15 years. The incidence of companies switching auditors is even less frequent. According to the Oxera Report it is around 4% on average for listed companies and less than 3% for FTSE 350 companies.

It’s not just a problem in the UK, however. Grant Thornton researched the global audit market:

The levels of audit market concen­tration across the world’s eight largest economies are danger­ously high, with the Big 4 firms respon­sible for up to 99% of large public company audits, according to research by leading accounting and business advisory firm Grant Thornton LLP in the UK. […] Analysis of auditor concen­tration among the G8 economies revealed a high of 99% in Italy, followed by the UK (98%), the US (97%), Canada (96%) and Russia (90%).

That, after Grant Thornton’s US boss issues a call for a study to be performed on the US audit market. Not sure what a study of the US market would reveal since the above quote refer­ences a 97% concen­tration of Big 4 firms on public company audits already. Clearly there is a problem.

Investors and businesses are not being well served by the current situation. I hate to advocate increased inter­vention by govern­ments of any kind, but it’s clear that public company audit committees also hate to advocate for share­holders’ best interests in terms of rotating audit firms and/or partners.

Maybe the solution is increased coverage of public companies that switched their audit to a non Big 4 firm. I would love to hear from any company in Canada that made the switch and is happier and better served for it.