Thus, the reform has to strengthen the message that not only the biggest audit firms are able to provide high quality service.
The European Statutory Audit Directive 2006 was thoroughly reviewed after the financial crisis in 2008 which resulted in an exact proposal of the European Commission in 2011. However, the long journey of this proposal towards the ratification has not yet been finished.
Many of the originally rigorous changes have been watered down since then. For instance, due to the views of the European Parliament the first proposal of the Commission – under which the market share of audit companies would have been maximized and which was also considered to be a declaration of war against the dominance of the Big Four – was ditched. In addition, it is also an event from April that the period of mandatory rotation of audit firms was raised from 6 to possibly 25 years. The six-year statutory auditor change was much criticized, mainly because of the high corporate expenses it could have caused. The draft approved by the EP is to be achieved by the end of the year, at the earliest.
Recently, the US House of Representatives passed a piece of legislation that if it becomes law, would prohibit the US Public Company Accounting Oversight Board (PCAOB) from requiring rotation of audit firms auditing US listed companies. To become law, the legislation would still need to be taken up and passed by the US senate and signed by the President of the US.
In connection with the reform not only a good and healthy dispute evolved, but also vivid lobby activities in both Europe and the US. The issues raised are very important, yet there is only little hope that the EU reform will truly mean substantial change.
To sum up, one thing is for sure: the dominance of the Big Four is still the greatest challenge towards efficient market competition, and this must always be kept in mind when it comes to changing the regulation.
Increasing transparency could have a good effect on the competitive conditions and would also help compare the quality of services. This way it would be easier to point out that high quality service is far from being the privilege of only the largest audit companies.