'Audit the auditors' call by consumer watchdog
The Office of Fair Trading (OFT) said an inquiry was needed to settle concerns that the top firms' dominant position keeps rivals out and makes it harder for companies to switch auditors.
Deloitte, KPMG, Ernst & Young and PwC, which are responsible for checking the books of nearly all the UK's largest companies, were criticised last year by a House of Lords committee over conflicts of interest and the quality of published accounts. FTSE 100 companies change their auditors every 48 years on average.
The committee also said the failure of auditors to communicate regularly with regulators ahead of the banking crash of 2008-9 amounted to a "dereliction of duty".
The OFT said in May that there were grounds for a competition investigation. It will now consult various parties for a further six weeks before reaching a final decision on whether to proceed.
OFT executive director Clive Maxwell said: "We believe at this time that a reference to the Competition Commission is an appropriate response to our long-standing competition concerns in this market."
James Barbour of the Institute of Chartered Accountants of Scotland said: "We would like to see increased choice … However, we remain to be convinced about the practicalities of potential remedies."
Catriona Munro, a competition and regulatory partner with Maclay Murray & Spens, said: "The Big Four will understandably be concerned about the remedies the Competition Commission has at its disposal, but other smaller players may welcome the development."
l HM Revenue & Customs is under fire from the Treasury after a report found "considerable dissatisfaction" with the tax office among consumers and tax professionals.
A sub-committee report, published today, found serious concerns in a number of areas, including unacceptable difficulties contacting HMRC by phone during peak periods.