Citation
(2006), "Special issue on Competitiveness of the audit services market", Managerial Auditing Journal, Vol. 21 No. 2. https://doi.org/10.1108/maj.2006.05121baa.001
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited
Special issue on Competitiveness of the audit services market
Special issue on Competitiveness of the audit services market
The competitiveness of the market for audit services has been a focus of attention as a result of significant events like the large audit firm mergers and in particular, the collapse of Enron. These events have wide global implications for the accountancy profession. Studies have been initiated to understand the different dimensions of the competitiveness of the audit services market. In the US, the Congress mandated in the Sarbanes-Oxley Act of 2002 that the General Accounting Office (GAO) should study various aspects of the audit services market competitiveness (GAO, 2003). In the UK, the Chancellor of Exchequer and the Secretary of State for Trade and Industry set up a Co-ordinating Group on Audit and Accounting (CGAA) Issues to investigate regulatory arrangements for statutory audit and financial reporting (CGAA, 2003). In addition, the Office of Fair Trading (OFT) has assessed the implications for competition of a cap on auditors' liability (OFT, 2004). Moreover, the European Commission has published a recommendation to address auditor independence issues such as the provision of non-audit services to audit clients and the rotation of auditors (EC, 2002). These reports have raised many interesting questions in relation to the competitiveness of the audit services market.
The purpose of this special issue is to contribute, theoretically or empirically, to the debate on this theme. Theoretical research work in this area has been limited. Furthermore, audit market competitiveness issues have also provided challenges for empirical researchers. For example, GAO (2003, p. 31) pointed out that research studies on changes in audit fees have used a variety of measures but have not conclusively determined the effects from audit firm mergers. It is difficult to isolate the effects of audit firm mergers and competition from the many other changes that might have affected audit firms and the way that they conduct their businesses. Amongst others, these changes include the growth of consultancy services, technological developments and changes in regulatory requirements.
Issues of audit services market competitiveness, which can be addressed at a global, national and firm level, include but are not limited to:
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efficiency gains and economies of scale of large audit firms;
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cost structure of audit firms;
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capital base, risk spreading strategy and legal form of audit firms;
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litigation risk and insurance costs;
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audit services market concentration;
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pricing of audit services;
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product differentiation (industry-specific and technical expertise);
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impact of divesting portions of consulting businesses on competition;
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barriers to entry faced by smaller audit firms;
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impact of cap on auditors' liability on competition; and
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impact of auditor rotation on competition.
References
CGAA (2003), "Review of the regulatory regime of the accountancy profession", Final Report to the Secretary of State for Trade and Industry and the Chancellor of the Exchequer, January.
EC (2002), Statutory auditors' Independence in the EU: A Set of Fundamental Principles, Commission Recommendation, May.
GAO (2003), "Public accounting firms, mandated study on consolidation and competition", Report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, July.
OFT (2004), An assessment of the implications for competition of a cap on auditors' liability, July.