Europe: Commission consultation on control structures in audit firms and their consequences on the audit market

The European Commission has published a consultation paper concerning control structures in audit firms and their consequences on the audit market. The purpose of the consultation is to identify ways by which the audit market can be opened up. In this regard, comments are sought on two proposals:

• modifying Article 3(4) of the Statutory Audit Directive 2006/43/EC, in order to deregulate the rules on audit firms' capital structure and ownership.  
• focusing on wider barriers including reputation, quality and expertise of staff and low client switching rates. 

In a press release, announcing the opening of the consultation, Internal Market Commissioner McCreevy stated:

We all need to think of how to bring new capital into the audit profession. Some have suggested that we should do away with ownership restrictions in audit firms and allow other players – not only audit partners – to invest in an audit firm. Audit firms fear that such relaxation could reduce the quality of audits and pose a risk to auditor independence. I want to hear more about both sides of the argument. I encourage all those who have a view or experience in this field to share it with us."

Comments can be submitted here. The Commission's 2007 study on the ownership rules of audit firms is available here.