Last checked at 
* Firms should tender for accounting work every 10 years
* Had previously considered demand to tender every 5 years
* EU likely to go step further with mandatory auditor change
By Huw Jones
LONDON, Oct 15 (Reuters) - Britain has pulled back fromaccounting reforms that would have forced top companies tochange book-keepers every five years, putting its regulatorspotentially at odds with tougher reforms likely to be introducedacross the European Union.
The reforms are part of a regulatory clampdown following the2007-09 financial crisis, because auditors had given banks aclean bill of health just before many had to be rescued bytaxpayers.
Critics have also said the "Big Four" accountancy groupshave developed too-cosy relationships with top companyexecutives and there has not been enough competition in themarket.
Under proposals released on Tuesday by the UK CompetitionCommission, the top 350 UK companies would be forced to puttheir book-keeping out to tender at least once a decade, toshake up a market dominated by KPMG,PricewaterhouseCoopers, EY and Deloitte &Touche.
But the changes which would take effect from the finalquarter of 2014 row back on an earlier draft recommendation thatwould have forced companies to re-tender their audit work everyfive years.
The watchdog, whose investigation had been launched inOctober 2011, had faced opposition from companies and investors,worried about the cost and disruption of very frequenttendering.
The sector's regulator, the Financial Reporting Council(FRC), had also wanted more time for its year-old rule requiringfirms to consider re-tendering at least once a decade to work -a rule that PwC said had already helped prompt 24 of the top 350companies to re-tender in the past year.
KPMG also said 10 years struck a better balance.
"Our measures will deliver lasting change in a market wherecurrently a major company putting its audit out to tenderremains unusual enough to be a news story," said LauraCarstensen, who chaired the Competition Commission's probe.
The competition watchdog shied away from a much tougheroption: forcing companies to change their accountant on aregular basis, a step the European Union is likely to introducein any case.
It also stopped short of restricting non-audit services likeconsultancy work, an area where the EU may cap fees.
David Barnes, managing partner at Deloitte UK, said theaudit market had changed since the competition watchdog beganits probe two years ago, with more tenders taking place.
"While this does provide clarity in the UK audit servicesmarket, there will be some uncertainty until the position inEurope is finalised," Barnes said.
LESS RADICAL
Middle-tier accountants such as Grant Thornton, Mazars andBDO have looked to regulators to prise open the market and BDOsenior partner James Roberts said some may regard the actionsbeing taken as less radical than many would have hoped.
"We are under no illusion that, despite the investigation,the establishment of real and sufficient competition is along-term undertaking," Roberts said.
David Herbinet, a partner at Mazars, said the reforms wouldprise open a once "ossified" market, though not overnight, whileGrant Thornton said it would help it commit to investing.
Many top firms have kept the same accountant for decades,with PwC having audited two banks, Barclays and Lloyds, for more than a century.
So far, the high-profile changes in accountants have beenamong the Big Four rather than allowing other firms a look in.
"This is a missed opportunity to give the largest listedaudit market the shake up it badly needs," Michael Snyder ofKingston Smith accountancy firm said.
While ceding ground on re-tendering, the competitionwatchdog confirmed a draft recommendation that the FRC shouldreview the audit engagement for each of the 350 companies onaverage every five years, a heavy undertaking for the regulator.
The FRC should also expand its remit to include competitionas an objective, confirming a recommendation made at the draftstage which had also raised concerns at a regulator with modestresources.
Michael Izza, chief executive of accounting body ICAEW, saidit was regrettable the competition watchdog had not simplyendorsed the FRC's voluntary approach to re-tendering.
Some Big Four officials have come round to seeing thebenefit of a likely EU law requiring a change in auditor,probably every 15 to 25 years, for the certainty that wouldbring.
"Bring it on," said one, adding that a mandatory switchingperiod would make it easier to plan ahead and more worthwhile totake part in a tender knowing the incumbent could not retain themandate.
