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The dominance of the "big four" accountancy firms, Deloitte, EY, KPMG and PwC, is set to be scrutinised following widespread concerns.

The Competition and Markets Authority said it would probe whether the sector is "competitive and resilient enough to maintain high quality standards".

The decision follows fears the sector "is not working well for the economy or investors", the CMA added.

It follows criticism of the auditors of collapsed construction firm Carillion.

"If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective," said the CMA's new chairman Andrew Tyrie.

'Move swiftly'

The CMA investigation will examine three main areas.

How firms choose auditors and the frequency of switching, with most firms still turning "almost exclusively" to one of the "big four" when choosing an accountant

Resilience of the industry because of the risk the "big four" firms' were "too big to fail", potentially threatening long-term competition

The lack of incentive for auditors to produce "challenging performance reviews" given that companies, not investors, pick their own auditor

CMA chief executive Andrea Coscelli said it planned "to move swiftly and to issue our provisional findings before Christmas".

The CMA's decision comes after the industry watchdog said earlier this year that the auditing work of the "big four" firms had deteriorated. The Financial Reporting Council said KMPG's audits in particular had shown "an unacceptable deterioration".

Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales (ICAEW),welcomed the investigation.

"It is vital that we rebuild public trust in audit - the success of UK business depends on it," he said.