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ARTICLE · 31 JANUARY 2019

CMA Publishes Update Paper On Statutory Audit Proposed Reforms To Improve Competition

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On 18 December 2018, the CMA published an update paper outlining issues and proposed legislative reforms to stimulate competition and improve audit quality.

United StatesAccounting and Audit
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On 18 December 2018, the CMA published an update paper outlining issues and proposed legislative reforms to stimulate competition and improve audit quality.

The CMA identified a number of issues with the current audit landscape, including:

  • Companies choosing auditors with whom they have 'chemistry' rather than those that provide appropriate scrutiny.
  • Limited choice, with the Big Four audit firms conducting 97% of the audits of the biggest companies.
  • With at least 75% of the revenue of the Big Four coming from non-audit services, auditors' focus appears skewed.

In response to these issues, the CMA proposes to:

  • Separate audit from consulting services, either through a structural separation (that is, prohibition of certain firms from providing non-audit services) or an operational split (e.g. the audit business has separate board, chief executive, staff and assets).

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