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European Union Internal Market Commissioner Michel Barnier plans to introduce draft legislation in November to curb the increasing concentration of auditing work among the Big Four firms.
“The auditing market is hyper-concentrated,” he said at a European Commission conference on the future of auditing, according to Reuters. “It is even more so on the most profitable segments of the market, and this inhibits the emergence of new big audit firms.”
Barnier said the E.U. had circulated public consultation on the future of auditing, and it received a massive number of about 700 responses with about 10,000 pages of suggestions. “We received more responses than there are people in this room,” said Barnier.
The heads of four large firms outside the Big Four—BDO, RSM, Grant Thornton, and Mazars—released a joint statement Thursday ahead of the European auditing conference calling for more competition in the market (see Global Audit Firm Heads Call for More Regulation).
Barnier seemed amenable to the idea of creating more competition in the European market for auditing public companies, which is largely dominated by the Big Four.
“We talk about the Big Four, who audit companies such as 99 of the 100 that make up the FTSE 100,” said Barnier. “But we can even talk about the Big Three or Big Two in some cases, I think, as in Germany, where 27 out of 30 companies listed on the DAX30 are audited by two firms, KPMG and PwC.” He wondered whether the failure of a firm could pose a systemic risk.
Source: Accounting Today
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