Just one year ago the Competition and Markets Authority proposed reforms that mandate all FTSE350 companies tender their audit services every ten years; and in April 2014, this reform was also passed by the European Parliament. The new rules also require Public Interest Entities (PIEs) to change auditor every 20 years.
The new reforms also restrict the amount of non-audit services an accountancy firm can offer audit clients; bring in Audit Quality Reviews; ban Big Four-only loan agreements; make auditors more accountable to audit committees to reduce the influence of executive management; and enhance the level of disclosures to shareholders.
In light of these new reforms, Proxima has taken stock of how these proposed changes are significantly altering the market for statutory audit in the UK. Our research is based upon our own experiences of conducting a wide range of tender processes on behalf of our clients over the last 24 months, as well as interviews with senior partners in the major audit providers and market reports from key industry commentators and bodies.
Using the results, we have produced a best practice guide, available to download for free, that highlights five key areas of best practice that we believe provide the discipline and flexibility to run an appropriate tender process. These include:
- Understand what you really want: If traditional procurement measures of objective quality and cost are not going to be differentiating factors, it is critical to understand the basis on which an award is to be made.
- Consider the bigger picture: It is important to think about where audit services sit in the grander scheme of provider/buyer relationships.
- Sell yourself: With everyone wanting to have the “A Team” working on their account, companies need to recognise that providers themselves have a choice about where to invest their resources.
- Take your time: To get the most out of those final presentations takes a lot of careful planning and arrangements.
- Get Real: There is little point in withholding information during the tender process – this will only undermine relationships at the start.
Regulatory changes, increased scrutiny, organisational complexity and a restricted market: audit now presents a significant procurement challenge for boards. But the real shift will come from developing effective relationships where the auditor can challenge the numbers and raise concerns in a considered and timely way. Using a tender to re-cast audit’s role and contribution – and looking differently at what firms can offer boards, executives and shareholders – can be a major win for everyone.
To learn more on how your company can benefit from the new audit reforms and the best practices you should be following, download our UK Audit Services: Five key recommendations for maximising your audit tender process for free. Guy Strafford