Auditing public interest entities (PIEs), ranging from banks and large international companies to smaller and more locally listed companies, requires significant resources and skills and is highly regulated. Having a diverse and resilient audit market with enough audit firms active in it is crucial and in the public interest. It ensures that all PIEs’ and their stakeholders’ needs are served, and PIEs can choose their auditor primarily based on quality.
The limited choice of audit firms and concentration in the PIE audit market are interlinked topics that have been attracting a lot of attention from stakeholders such as academics and policymakers. This publication aims to contribute to the debate focusing on the aspect of auditor choice, by looking at all parties that play a role in this market – companies, including their audit committees and shareholders, auditors, policymakers and audit supervisors.
In particular, we aim to:
We urge policymakers not to underestimate the disincentives and challenges that audit firms face when attempting to move into the PIE audit market. We also invite policymakers to explore our ideas to make PIE audits more attractive.
We plan to organise an event in 2023 to enable a public discussion amongst relevant stakeholders.
The Committee of European Auditing Oversight Bodies’ (CEAOB) report outlines CEAOB’s recommendations concerning the European Commission’s corporate reporting initiative. While the report itself has not been made public, the related document published on CEAOB’s website highlights the following:
The consolidated version of the EU Statutory Audit Directive has been amended to include the EU Corporate Sustainability Reporting Directive (CSRD) amendments. The new version is available here.
There is also a new consolidated version of the EU Accounting Directive, including the CSRD amendments, with a change related to the audit requirement in article (34).
The Institute of Internal Auditors (IIA) has released a draft of the new Global Internal Audit Standards for public comment. Stakeholders are encouraged to share their views on the new standards. The public comment period closes on 30 May 2023.
The International Forum of Independent Audit Regulators (IFIAR) has released its eleventh annual survey of inspection findings. The survey arises from its member regulators’ inspections of audit firms affiliated with the six largest global audit firm networks.
IFIAR Members reported in the 2022 survey that 26% of audit engagements inspected had at least one finding, compared to 30% in the 2021 survey, and down from 47% in the first survey capturing this metric in 2014. While the survey findings have shown improvement since tracking began, they also indicate the need for a sustained focus on continuing improvement.
The International Federation of Accountants (IFAC) published its third annual benchmarking study of global practice in sustainability disclosure and assurance.
The study analysed whether companies report sustainability disclosures and obtain assurance. It inquired which assurance standard companies use and which provider offers assurance services.