AUDITING REPORT

A Report Entitled “Audit concentration -Lack of Competition in the Large Company Audit Market”

Introduction3

Discussion3

Concentration Development4

Reasons of Auditing market Concentration5

Analysis of the Concentration Research of Auditing Market6

Concentration Measurement6

Concentration Research7

Supplier Concentration8

Conclusions9

References11

A Report Entitled “Audit concentration -Lack of Competition in the Large Organization Auditing market”

Introduction

With respect to the article published in Accountancy Age on 13th August 2013, the Competition Commission (CC) has finished its closing report on the delivery of statutory audit services to big organizations in the United Kingdom (CC, 2013, n.d.). The main objective is to expose the external audit market of UK to better competition and guarantee that audits serve the requests of shareholders in a better way. According to the report, the competition is constrained in the external audit market for the reason that there are certain aspects that hold back organizations from changing auditors and since auditors have inducements to concentrate on gratifying the management instead of the needs of the shareholder (CC, 2013, n.d.). The CC has started out a bundle of remedies that includes measures to develop the bargaining power of organizations and promote competition between auditing companies; measures to improve the impact of the auditing committee; and measures to encourage auditing standard and shareholder involvement in the auditing procedure (CC, 2013, n.d.).

Discussion

The auditing market of organizations that are traded publicly is extremely concentrated in majority of European countries (DeAngelo, 1981, p.184). The suppliers' concentration, categorized by the oligopoly of the alleged audit organizations known as the “Big Four” comprises of Ernst & Young, Deloitte, PwC and KPMG, involves among others the piece of evidence that in the continuing trend medium and small sized organizations are washed out from the market. The word “concentration” defines the cluster of economic power available in a number of industrial zones, comprising of various causes (Minyard & Tabor, 1991, p.82).

Concentration Development

Concentration development is a topic of discussion in the field of economic research for centuries, while concentration support on the market of lawfully requisite audits for organizations that are publicly traded is established all over the world since 1960s (Fearnley & Beattie, 1994, p.318). Suppliers' concentration on the auditing market, to be settled on with the assistance of experimental studies, ought to be evaluated unenthusiastically from the standpoint of competition policy, with respect to the fact that

Big Four's powerful impact on the advancement of global standards auditing and accounting ought to be assumed.

There are loads of barricades of access for medium and small size audit organizations

The inducements to guarantee cost efficiency and proper audit standard are declining

Together with rising suppliers' concentration, big audit organizations are experiencing immense market power, in order that, owing to the joint market domination, price agreements between the “Big Four” audit organizations are feasible during cartelization (CC, 2013, n.d.). This concentration can perhaps bring about a monopolistic or an oligopolistic market structure. On the other hand, the existing competition strength counts on a number of factors and not just on the quantity of suppliers together with their shares in the market, in order that ...