“Joint Audit is the only proven solution to increase market competition”

2 QUESTIONS TO CHRISTOPH REGIERER, MEMBER OF THE GROUP EXECUTIVE BOARD

Christoph, you are a longstanding advocate of audit reform. Why is this such a hot topic today in the UK and beyond?

We are all familiar with the recent scandals, such as the collapse of Carillion in 2018, which have once again fed the debates around audit reform. But also, in the last couple of months, a series of UK authorities have all converged towards a consensus: audit reform in the country is essential and long over-due. The last report to date, published by the British Competition and Market Supervisory Authority (CMA) on 18 April 2019, has severely highlighted the flaws that exist in the current audit market. The report calls for greater competition and has concluded that joint audits are the only proven solution to tackle market concentration. Just to give you an idea of the extent of the concentration in the UK, 100% of companies listed in the FTSE 100 and 97% in the FTSE 350 are catered for by the Big Four firms.

This report has been widely read by other regulators around the world, so joint audit is back on the agenda globally.

Nonetheless, why does this mean joint audit is the adequate solution?

1)    Firstly, the facts speak for themselves: France introduced mandatory joint audits more than 50 years ago and, as a result, the French audit market is more diverse than any other national economy in the EU. Therefore, joint audit is the only proven solution to increase market competition and should be seriously considered for audit reform within and outside the EU.

2)    Secondly, joint audits improve quality. Why? Because having two auditors strengthens the control mechanisms in place and seriously reduces the probability of error. Having two sets of expertise can only benefit the quality of the audit. Moreover, the three-way relationship between the company and the two auditors ensures higher degrees of independence and objectivity.

3)    Finally, joint audits reduce the risk of knowledge loss when changing auditor during a mandatory rotation. If one of the appointed auditors stays on during rotation, then the transition is guaranteed to be smoother and knowledge can be passed on easily.

Download Dr. Christoph Regierer’s full article below, which was published in Board magazine (July 2019). 

Related content

Audit 1600 x 700.png

Badanie wspólne szansą na rozwój niewielkich firm

Ustawa o biegłych rewidentach określa pojęcie badania wspólnego. Chodzi o badanie przeprowadzane przez dwie lub więcej firm audytorskich. Biorąc pod uwagę koncentrację rynku w związku z wprowadzeniem bardzo krótkiego okresu rotacji i zakazu wykonywania jakichkolwiek usług dodatkowych przez firmę audytorską, wydaje się, że może to być rozwiązanie pozwalające na rozwój średnich i małych firm audytorskich, a zatem na rozwój rynku i stworzenie realnej alternatywy dla dużych firm – tłumaczy Monika Kaczorek, biegły rewident, partner i wiceprezes w Mazars Audyt.

What you need to know about joint audit 1600 x 700.png

A guide to Joint Audit

There is now unanimous agreement that the overwhelming dominance of just four firms in the global audit market is unsustainable and that reform is required to go from “four to more”. Unfortunately, and even though it is still in its early stages, there are clear signs already that the 2014 EU Audit Regulation and other interlinked initiatives are not going to achieve their desired objectives of reducing market concentration, increasing competition and improving audit quality.

Download pdf 525.85 kB