EU business survey reveals majority support for a more diverse audit market and mandatory auditor rotation

LONDON AND TORONTO, April 11, 2012 /CNW/ - A clear majority (60%) of businesses across the EU believe there needs to be a more diverse audit market, and 54% support mandatory rotation of audit firms every 10-12 years to address the risks of 'over familiarity' between the auditor and the audited company, according to a recent survey of 1,000 EU businesses.

"We welcome any further research and discussions aimed at bringing about positive change in the structure of the EU audit market," said Grant Thornton International CEO Edward Nusbaum.

Other key findings:

• Support for a more diverse audit market was strongest in Greece (86% vs. 12%), the United Kingdom (73% vs. 23%), Sweden (73% vs. 27%), Ireland (72% vs. 21%) and France (72% vs. 16%).
• Support for mandatory auditor rotation was strongest in Spain (74% vs. 6%), Ireland (68% vs. 15%), Greece (66% vs. 10%), France (64% vs. 15%) and Poland (62% vs. 18%).
• A majority (51%) of EU businesses think it would help market confidence if every large public company was audited by two firms rather than one, with 42% disagreeing.  Support was strongest in Greece (78% vs. 18%), Sweden (73% vs. 27%), France (63% vs. 33%), Italy (60% vs. 18%) and Denmark (58% vs. 38%).
• 37% believe there should be restrictions on non-audit services so that consultancy work can no longer be provided to an audit client, while 26% do not think so. Support for this was strongest in Spain (60% vs. 16%), Greece (56% vs. 20%), Poland (54% vs. 28%), Belgium (52% vs. 22%) and Italy (48% vs. 8%).

Last November, the European Commission published proposals focusing on the reform of the Statutory Audit market. The Commission has proposed reducing the concentration of the audit market while, at the same time, increasing incentives for audit firms to act independently.  The vehicles that the Commission has chosen to enable them to achieve this include mandatory audit firm rotation, mandatory tendering, and restrictions on non-audit services.

The survey was conducted by Experian in January and February 2012 as part of the Grant Thornton International Business Report, a quarterly global business survey of 2,800 public and private businesses of which 1,000 were from the EU.

The vast majority of large public businesses are audited by only four firms. Do you believe that a stronger market framework needs a diverse audit market?
Yes, definitely	Yes, probably	No	Don't know
34.20%	25.90%	30.30%	9.60%

Do you think it would help market confidence if every large public company was audited by two firms rather than one?
Yes, definitely	Yes, probably	No	Don't know
26.00%	25.20%	42.00%	6.80%

To what extent do you support mandatory rotation of audit firms every 10-12 years [to address the risks of 'over familiarity' between the auditor and the audited company]
Strongly disagree	Disagree	Indifferent	Agree	Strongly agree	Don't know
12.70%	8.60%	18.20%	21.60%	32.70%	6.20%

To what extent do you support restrictions on non-audit services [so that consultancy work can no longer be provided to an audit client]
Strongly disagree	Disagree	Indifferent	Agree	Strongly agree	Don't know
12.20%	14.20%	25.50%	17.60%	18.90%	11.70%

To what extent do you support pure audit [firms with a very substantial size in audit will no longer be able to provide non audit services]
Strongly disagree	Disagree	Indifferent	Agree	Strongly agree	Don't know
12.70%	14.20%	29.20%	13.50%	15.90%	14.40%

 

 

John Vita
Director of Global Communications -- Public Policy and External Affairs
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Tania Freedman
Senior Manager, Media Relations, Canada
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