In terms of regulations, shall all FTSE-100 firms audited by big4?
I would like to consider the auditor dummy variable (big4 = 1; not big4 = 0) on FTSE-100 firms. In case they should employ auditors by big4, this variable will be useless, and I can remove it.
Are they?
If all the 100 firms were audited by big 4 then you may consider other measures of audit quality. Because there is no variability in big 4 measure in respect of your sampled firms.
Not all FTSE100 companies are audited by the big 4 firms. A few are audited by the second tier firms Grant Thornton and BDO. A reference from the ICAEW is below to confirm that.
In any case, FTSE100 companies are required to rotate their audit firms on a regular basis, so the firms will always be subject to ongoing change.
Here is the article you need:
https://economia.icaew.com/news/september-2018/pwc-loses-lead-over-ftse-100-audit-rivals
If skills sets are applicable. One of the key areas that are narrowing is the reliance for parents companies within group audit and the body FOF - worth a bit more research they are more big 4
Dear Ghassan,
There is no such regulation which requires only the Big 4 to audit FTSE100 companies. The process is determined by the market and other related competitive forces including, but not limited to, resources, quality, experience, etc. Nonetheless, as noted by Chris above, the majority of firms are being audited by the Big 4 in addition to GT and BDO.
Thank you Emad, I have scanned some annual reports of 2013 and 2014, found that 1-3 firms audited by non-big 4 out of 100. This is lead to conclude that a dummy variable is not relevant.
However, following the collapse of Carillion, which led to several questions and multiple parliamentary inquiries, the domination of the Big 4 is being questioned.
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