Oxera backs reform of audit ownership rules

The Internal Market Directorate of the European Commission has published an independent study on the ownership rules of audit firms and whether changes to these rules might help increase the number of international players in the audit market.

‘A large majority of respondents to the public consultation on possible reform of liability rules in the EU were concerned about the issue of lack of choice in the market for large international audits,’ Charlie McCreevy, internal market and services commissioner, said. ‘I take those concerns seriously. The question now is how to create opportunities for new players to enter the market. The Oxera study provides valuable input to this debate and will help us in deciding any further steps.’

The Oxera study showed restrictions on access to capital were one of several potential barriers to entry in the market. Other barriers included reputation, the need for international coverage, international management structures and liability risk.

Analysis of an investment model developed to assess potential expansion plans suggested an audit firm owned by external investors, rather than auditors, might more easily decide on expansion into the market of large audits because existing ownership structures might increase audit firms' cost of raising capital by as much as 10%.

Further reading:

Boldness a dirty word in audit choice reform

FRC report unlikely to affect audit choice