UK: Competition Commission proposes mandatory audit tendering and other measures

The Competition Commission has published, in provisional form, the measures it is proposing to include in its final report on the supply of statutory audit services to large companies in the UK: see here (pdf). These include:

• FTSE 350 companies should put their statutory audit out to tender at least every five years (with the possibility for deferral by up two two years in exceptional circumstances).
• The Financial Reporting Council’s Audit Quality Review (AQR) team should review every audit engagement in the FTSE 350 on average every five years. The audit committee should report to shareholders on the findings of any AQR report concluded on the company’s audit engagement during the reporting period.
• The prohibition of provisions in loan agreements that restrict the company's choice of auditor. 
• Shareholders should have an advisory vote on whether the audit committee's report in the annual report contains sufficient information. 
• Only the audit committee should be permitted to negotiate and agree audit fees and the scope of audit work, initiate tender processes, make recommendations for appointment of auditors and authorise the external audit firm to carry out non-audit services.
• The Financial Reporting Council should amend its articles of association to include a secondary objective to have due regard to competition.

The Commission's final report will be published in September.