Finance Monthly - October 2021

27 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s he Big Four have stated they will not be supporting proposals for shared audits, citing the potential doubling down on work, that they see no evidence the measure would improve the quality of audits and fears that not enough smaller firms would be interested in taking part. These firms audit 97% of the FTSE350 and also compete for hugely more lucrative ‘other professional services’ with the same client. As such, the introduction of these proposals will have huge knock- on impacts on the choice, quality, and availability of audit services in the market, meaning positive collaboration with the Big Four and alignment in assessments for how to effectively transform the sector will be near essential. The Big Four’s reluctance to enter into shared audit seems to predominantly boil down to a risk issue; albeit a combined or shared audit, the Big Four will undoubtedly be in the firing line for the overall quality of the audits by virtue of their status, who they are as a company, and their having the ‘deepest pockets’. The Big Four have already made clear that their appetite for shared audits is next to none due to the additional costs incurred in order to ensure the quality of these audits throughout are at the standard required to avoid the aforementioned ‘firing line’. What’s more, concerns from the Big Four surrounding how the riskier areas of these shared audits will be managed would not be misplaced. Will it be expected that one firm will cover these more risky areas? Or will these areas remain combined? If the latter, this runs the risk of the audit and its riskier areas becoming ever more complex, running increased risks of shared audits failing to meet the standards required. Due to the monopoly of the Big Four in the audits of these companies, smaller firms often also have less expertise and significantly less experience with the audits of these major UK companies. Thus, both these smaller firms as well as the Big Four firms managing these shared audits in collaboration may not have the confidence in the quality of certain areas of the audits they are undertaking.