LONDON - Britain's Office of Fair Trading has ordered a full-scale competition review of the four big auditing companies which dominate the market.
PricewaterhouseCoopers, KPMG, Deloitte, and Ernst & Young last year collectively earned 99 per cent of the audit fees paid by FTSE-100 companies, the OFT said.
"The market for large company audits lacks sufficient competition and does not work well for customers," John Fingleton, the agency's chief executive, said Friday as the probe was launched.
"It is highly concentrated, largely supplied by four big firms, with clients rarely switching between auditors. There are also high barriers to entry for new and smaller competitors. These are not the indicators of a competitive market."
The companies said they expect to be vindicated by the review.
"There is fierce rivalry as we compete vigorously for audit appointments," said Richard Sexton, a member of PwC's board. "All of our audit engagements are for one year only, after which shareholders must vote again to decide on our reappointment."
KPMG also said it believes "there is already effective competition and pricing."
There was no immediate indication of what remedies the commission might propose if it finds the market is unduly restrictive.
The Competition Commission has the power to break up companies. In a recent case, the commission ordered BAA, the owner of Heathrow airport, to dispose of three other British airports.