Compulsory audit profit disclosure 'will boost transparency'

News Article - 02 July 2007
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A suggestion by the Financial Reporting Council (FRC) involving the mandatory disclosure of audit profits made by accounting firms has been backed by one expert.

Robert Kerr, managing director of French Duncan, said that such a rule would ease the hold that the Big Four accounting companies have on the market and allow for greater transparency in the sector.

He told the Herald that large businesses tend to automatically opt for the Big Four to handle their audits as they are seen as being "safe".

However, he pointed out that all of the biggest corporate frauds uncovered in recent times have been at firms where the audit was managed by a Big Four firm.

"So far as most PLCs are concerned, audits are generally regarded as little more than a legislative requirement," Mr Kerr commented.

"That is why they will typically look for external auditors to do what they have to do as quickly as possible and with the minimum of fuss and disruption."

Last year, the FRC published a discussion paper entitled Choice in the UK Audit Market following the commissioning of a study on the topic in conjunction with the Department of Trade and Industry.

According to the study, the Big Four handles the audit for 99 FTSE 100 companies and 93 per cent of all listed firms, apart from those on the AIM market.

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