A terrifying assessment. Sound familiar?
The challenge for regulators is exacerbated by the fact that there are only four firms equipped to audit large multinational companies. The industry cannot afford to lose a firm because of commercial or regulatory pressures, or a hit to their reputation from a failed audit.
Deloitte’s Mr Sproul says: “The market would be disadvantaged if there were only three auditors.” It is important to make sure that audit remains attractive, he added.
“If the degree of price pressure, the degree of regulatory pressure, or litigation risk moved materially it could make audit unattractive.”
A former long-serving partner at one of the Big Four firms says: “It’s a Faustian relationship. If we were to lose one of the Big Four we would have an even bigger set of problems.”
All of these concerns about threats to audit quality and independence are drawn into sharp relief by the sheer — and increasing — size of the auditors.
Ms Fearnley says: “In common with the banks, the auditors are too big to fail, too big to manage internally and too big to regulate.”