Global audit firm leaders believe joint or consortia audits should be considered in an effort to break up concentration of the audit market.
The global chiefs of Mazars, BDO, Grant Thornton International and RSM International told the International Accounting Bulletin that joint or consortia audits offer firms outside of the Big Four a chance to prove they can provide quality audit services to clients that would otherwise be unattainable.
They hope that the EC will consider whether joint or consortia audits can be successfully implemented in its attempts to reform the audit market.
A joint audit could take many forms, such as firm auditing a subsidiary of a group of companies, or a model where two firms share the work of a single entity but might cover different departments or business lines.
In France, joints audits have been in place for a number of years, which has helped Mazars establish itself as the largest firm outside of the Big Four.
The effect that joint audits have had on dynamising the market has been mitigated by Big Four firms merging or acquiring other strong French firms, according to Mazars chief executive and president Patrick de Cambourg.
“What it has achieved in France is the possibility a number of players to access the audits of a large corporate and this is the case for one of the signatories of the joint statement,” de Cambourg said.
“It could have been the case [that there were other firms that have benefitted] if they had not been acquired… they disappeared because they were breaking the ice and moving up and, of course, a significant offer in financial terms is being put on the table and then ‘poof’ [they vanish].”
A question of quality
A common argument against the use of joint or consortia audits is that it hampers the quality of the audit.
BDO chief executive Jeremy Newman says the “jury is still out” on whether it impacts upon audit quality
“I think there is evidence that structured properly they could dynamise the market and start to create a difference,” he said. “The responses from the ones who oppose this are just very simple and they just say it does not increase audit quality. However if they do dynamise the market surely they should be something the EC should look at.”
De Cambourg added: “I have never heard a leading partner going to tender and saying I would rather go on the standalone basis or that this doesn’t work. This system does work.”
Grant Thornton UK head of financial reporting Chris Smith told the International Accounting Bulletin his firm audits a number of components of a ‘very, very big group’ and it has no negative impact upon the quality of the audit.
“They asked that we get involved because they were uncomfortable with their group auditor being involved in everything,” he said. “It works very well.”