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February 10, 2011

Leaders call for joint audits to be considered

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.”

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