UK: CMA report and recommendations - statutory audit market

The Competition and Markets Authority has today published its final report followng its statutory audit market study: see here (pdf). A summary of the final report is available here (pdf) and a press release highlighting the recommendations is available here. The recommendations include:

• An operational split within (initially) the 'Big Four', requiring separate governance and management structures (e.g., a separate CEO and board; separate financial statements for the audit practice).  If this does not deliver the anticipated benefits, the case for a structural split should be revisited.
• Mandatory joint audits, with challenger firms working with the 'Big Four' and having joint liability.
• Greater regulation of audit committees by the new Audit, Reporting and Governance Authority (ARGA), the proposed successor of the Financial Reporting Council. ARGA should have the power to request information from audit committees and to issue public reprimands; it should have the power to appoint an observer on the committee.
• A review of progress in five years, by the ARGA.