28th March 2011:

EC Green Paper – more developments

Last week Antonio Masip Hidalgo, Member of the European Parliament, issued the report and recommendations of his Committee on the European Commission’s Green Paper ‘Audit Policy: Lessons from the Crisis’.

As you would expect, I read the report with interest.  MEP Hidalgo is correct to refer to the Big Four as an ‘oligopoly’ – with all the implications that has for competition; it is perhaps no surprise that market forces alone can not produce the necessary changes required to increase competition.  I think even the Big Four now accept that the present market concentration within our profession is not healthy – the difference of view being the extent to which intervention is required to address the situation.  Indeed, having for many years denied their existence the Big Four firms in the UK (albeit with differing degrees of enthusiasm) have recognised that something needs to be done about restrictive covenants (ie Big Four only clauses) in lending and other financing agreements.

Recent announcements from Brussels give us reason to be cautiously optimistic.  The Commissioner for Internal Market and Services, Michel Barnier, speaking at the European Commission’s conference on the future of auditing confirmed that “things will not stay stagnant” and that “no change is not an option”.  
I have no doubt that Hidalgo’s report, amendments and subsequent decisions will become an important contributor to the development of the audit profession and will impact greatly upon its future direction.  It would be deplorable for the status quo to remain when there is such an opportunity for greater transparency, choice and competition.

We, and others, seek equal opportunity, not preferential treatment.  By removing barriers we hope to help create a more dynamic, equitable and stronger profession.  The challenge we must all face up to is ensuring that new regulation creates an environment for this framework to flourish, not one that reinforces the present, failing model – we must all work towards a credible alternative.  This requires everyone in the profession, including the Big Four, to positively engage in the debate and to positively embrace change.  I hope that all my colleagues will respond positively.

 Standards & Regulators  0 Comments March 28th, 2011