Leading mid-tier accounting networks have
joined forces to call for intervention in the audit market saying
“no action is not an option”.
Following the European Commission’s green
paper, Audit Policy: Lessons from the Crisis, BDO, Grant
Thornton International, Mazars and RSM International have jointly
agreed there is an urgent need to enhance competition and choice to
tackle the heavily concentrated audit market.
The global firms said a new approach
is needed to tackle concentration and have proposed three
actions:
- Banning contractual clauses or other bias in
favour of the Big Four firms; - Regular reassessment of audit appointments by
audit committees; and, - Global assessments of significant mergers or
acquisitions particularly by the Big Four.
An example of a significant Big Four
acquisition causing further concentration in the market is
Ernst & Young’s buyout of the largest mid-tier firm in
Brazil, Terco, which was previously affiliated with Grant
Thornton.
In their statement BDO, Grant Thornton, Mazars
and RSM also called for a “truly” single audit market that would
help auditors work more easily across borders and be registered and
supervised on a pan-European basis.
The four also support enhancing the relevance
of auditing by reviewing how audit findings are reported, the
inclusion of more information on how risks are identified and
assessed, as well as offering a greater level of assurance on
narrative reporting “especially regarding the management and
governance bodies’ views on the uncertainties facing the
business”.
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By GlobalData“There is also significant merit in
considering the progressive implementation of joint audits or
consortia audits, which may come in various forms, in order to
strengthen confidence in the audit and improve the diversification
of the audit market,” the group said.
This is the first time major mid-tier
firms have united to call for regulatory intervention to
improve choice in the market. This change of tact indicates the
mid-tier have lost faith in a market-led solution.
“We welcome the initiative taken by the
European Commission with its wide ranging review covering all
aspects of the audit profession, as well as the international
leadership it has offered. We strongly support the view that there
is an urgent need for an integrated programme of reforms and a
necessity for regulatory action,” they said.
Tomorrow, the
International Accounting Bulletin will publish an
exclusive interview with the global leaders of BDO, Grant Thornton
International, RSM International and Mazars.
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