Mid-tier shortcomings undermine challenge to big four
London | The British accounting regulator has criticised BDO and Mazars for “unacceptable” shortcomings in their audits, underlining the challenge the groups face in loosening the grip of the big four firms on the market.
In its annual review of audit quality, the UK Financial Reporting Council highlighted the recurring failings of the two firms while also acknowledging the progress they had made over the past year.
Mid-sized firms such as BDO and Mazars have ambitions to break the stranglehold of the big four on the audit of large UK companies — Deloitte, EY, KPMG and PwC audit 98 per cent of companies in the FTSE 100.
But the likes of BDO and Mazars have lagged their larger rivals in recent audit quality inspections as they struggle to make the long-term investments in technology, training and quality control that are required to meet the regulator’s requirements.
The council has said it wants the big four to face more competition but that it will prioritise the quality of firms’ work.
According to its latest annual review, published on Thursday, Mazars received the lowest inspection scores for the second year running out of the seven “tier one” firms examined. The regulator said it was “unacceptable that failures identified in previous inspections had been repeated this year”.
Only 56 per cent of Mazars’ audits reviewed were found to have been of good quality or to require only limited improvements. None required “significant improvement” — the lowest score.
This was an improvement on last year when only 50 per cent were deemed up to scratch and three audits were found to need significant improvement.
At BDO, the most successful of the mid-tier firms in winning more business among FTSE 350 companies, the number of
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