The UK’s top companies are switching auditor more frequently, although the number changing provider remains low according to research.
Some 85 companies - less than a quarter of the FTSE350 - have changed their auditor since 2011. But this compares to just 40 firms who switched in the decade prior to that. The research, conducted by Proxima, found more than half the FTSE350 have been using the same auditing firm for 10 years or more.
In addition, 46 companies switched provider in the first half of 2014, compared with just 27 in 2013 and six in both 2012 and 2011. The procurement outsourcing provider suggested this marked a change in attitude in the approach of big companies to the category.
Firms that did put their audit requirements out to tender saved an average of 10 per cent as a result.
Proposals put forward by the Competition Commission in 2013 – which will come into force in 2020 - stated companies will have to put their audit requirements out to tender every 10 years as part of reforms to increase competition.
According to Richard James, category director for professional services at Proxima the regulatory change is an opportunity for companies to drive more value from their provider.
“Selecting the right auditor for the business is critical, but it is not easy. Buying statutory audit is not like buying stationery or cleaning services – you can’t assess the quality of the output and reverse engineer the price,” he said.
“The business must understand exactly what it wants from its audit and that’s unlikely to be the lowest cost. Relationship management, cultural alignment and sector specialism will be much higher up the wish list."
He added with more than nine in 10 firms audited by one of the ‘big four’ – Deloitte, PwC, E&Y and KPMG – so-called ‘tier two’ firms are hungry for contracts and can offer alternative ideas and perspectives when invited to tender.
But companies should act now to secure the best value. “The best audit teams will not be around forever, and so it is imperative to start the tender process sooner rather than later to secure the ‘A-team’ ahead of the competition,” said James.