LONDON (Reuters) - The Bank of England said on Wednesday there is too little choice of auditor for big banks who must switch book-keepers under European Union rules.
Listed firms are required to “rotate” auditors at least every two decades to ensure there is a fresh and sceptical pair of eyes examining their books and challenging management.
The audit sector is dominated by the Big Four: PwC, KPMG, EY and Deloitte. Their nearest rivals, such as Grant Thornton and BDO, are much smaller, meaning that auditing a large bank with many subsidiaries across the global is more of a challenge.
BoE Deputy Governor Sam Woods said he has “an issue with the ever more concentrated pool of large auditors” able to audit large firms that must meet the rotation requirements in Britain.
“We have one particular issue with the subsidiaries of foreign firms who don’t have the rotation requirement at home but do have it here. It’s in the context of that we have been discussing with firms,” Woods told parliament’s Treasury Select Committee.
Sarah Breeden, BoE executive director for international banks supervision, told the lawmakers that the BoE wanted to make sure that the next tier down of auditors from the Big Four had the necessary skills and expertise to audit a business like Goldman Sachs International in London.
The Times of London newspaper reported on July 10 that the BoE was examining whether Goldman Sachs could appoint Grant Thornton as an auditor in Britain.
“There is a dialogue that’s happening rather than a querying,” Breeden told lawmakers in response to the report.
The audit sector’s regulator, the Financial Reporting Council, said last month that some audits of banks were not up to scratch.
“It’s a bit of a worry,” Woods said of the FRC findings.
Editing by Alexandra Hudson