The Economist: Efforts to fix the market in auditing rumble on

24 January 2019

Regulators in both Britain and Europe want to make audits less cosy.

Auditors are supposed to provide an independent view of company accounts. But regulators fear that the relationship between auditors and those they audit can become too cosy—which is why the European Union has decided that, from 2020, companies will have to switch auditor at least once every 20 years. Last week the FRC, a British regulator, sent a letter to audit firms warning them away from “rotation in form but not in substance”.

That was aimed at subsidiaries of American banks. The FRC wants to deter Goldman Sachs and pwc, the auditor it has used since 1926, from seeking to satisfy the new rules by hiring a smaller auditor for the Wall Street firm’s British subsidiary while retaining pwc for the global business.

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