October 2010
BDO, the world's 5th largest accountancy network welcomes today‟s European Commission Green Paper and the suggestion that regulators may need to intervene to deal with concentration in the audit market.
Offering initial comments on a European Commission Green Paper, “Audit Policy: Lessons from the Crisis”, published earlier today, Jeremy Newman, CEO of BDO, the world's fifth largest accountancy network, welcomed the Commission's declared intention of assuming a leadership role in the international debate on the role of auditors and also welcomed the start of a comprehensive debate involving a broad range of stakeholders on what needs to be done to ensure that audits of financial statements and audit reports are 'fit for purpose'.
Referring to the Green Paper‟s comments on concentration and market structure, he said: “We are encouraged by the attention the Green Paper gives to concentration in the audit market and the structure of that market for larger listed companies. We have long argued that the concentration found at the top end of the audit market is unhealthy. We welcome the suggestion that legislators/regulators may be prepared to act to deal with concentration in the audit market, since it is clear that the market itself has not been able to deal with this issue.
“The Commission raises some very interesting possible remedies which we will be studying closely and commenting on in our response. It is clear that the market has not been able to rectify this imbalance and intervention may be necessary to effect change”.
Today‟s Green Paper from the Commission notes that the 'Big Four' conduct more than nine out of ten audits for listed companies in most member states, making market entry for many other firms “very difficult…despite their capacity to work in the international audit market”. The Commission sounds a warning that “such concentration might entail an accumulation of systemic risk and the collapse of a 'systemic firm' or a firm that has reached 'systemic proportions' could disrupt the whole market”. The Commission said it seemed that “there are also instances of 'Big Four only' contractual clauses that are sometimes imposed on companies by, for example, financial institutions as a condition to grant a loan.
Today Mr. Newman said: “The 'Big Four is best' bias is a particularly significant topic and we are pleased to see the Commission contemplate remedial measures in this area, particularly in the area of 'Big Four only' clauses”.
He revealed that BDO is conducting a study of this issue across the 27 member states of the European Union. He said: “Early results show evidence of such clauses being applied in over half of the member states. It is timely that the Commission should be seeking to explore this and other anti-competitive practices in the market as part of the review”.
A considered and comprehensive response from BDO to the European Commission‟s Green Paper will be prepared before the Commission's 8 December deadline for comments.
Ends
Note to editors
BDO International Limited is a UK company limited by guarantee. It is the governing entity of the international BDO network of independent member firms ('the BDO network'). Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels.
Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms is a separate legal entity and has no liability for another such entity‟s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network.
BDO is the brand name for the BDO network and for each of the BDO member firms.
The combined fee income of all the BDO Member Firms, including the members of their exclusive alliances, was $5.03 billion in 2009. The global network has 1,138 offices in 110 countries and more than 46,000 people provide advisory services throughout the world.
Contacts
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