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Deloitte comment letter on CMA proposals for audit reform in the UK

Published on: 27 Aug 2014

We have published our comment letter on the Competition and Markets Authority’s (CMA’s) consultation on the draft Statutory Audit Services for Large Companies Market Investigation (Mandatory use of competitive tender processes and Audit Committee responsibilities) Order 2014 ("the Order").

We welcome the CMA’s decision to align the timetable and transitional requirements for their requirement for FTSE 350 companies to tender their audits every ten years with the tendering and rotation requirements of the new EU audit reform package. Our main comment concerns the interpretation of those transitional provisions; we urge the CMA to discuss these with the Department for Business, Innovation and Skills (BIS), and the European Commission. This would help avoid confusing interaction between three different sets of rules – those of the CMA, those of EU law, and the requirements of the UK Corporate Governance Code which will remain until at least October 2016.

Our other comments are:

  • in order to avoid an immediate and unplanned tender if a company unexpectedly enters the FTSE 350 during a year, the status of the company in the preceding financial year should be used to determine whether the Order applies to a company;
  • a statutory requirement to disclose compliance with the Order would be uninformative to stakeholders. More useful quantitative and qualitative information is already required by the UK Corporate Governance Code and other parts of the draft Order – if a disclosure obligation is retained, it should be made more informative; and
  • the CMA should be clear that they intend to use the information gathering powers in the Order only if sufficient information is not already available. We believe that compliance with the Order should be monitored by the FRC, who will already be monitoring compliance with the rotation and tendering requirements of the EU audit reform package.

The full comment letter can be downloaded below.

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