|Companies listed on the Irish stock exchange have complicated accounting
requirements and procedures compared to the smaller private companies in Ireland.
Many smaller audit firms cannot provide this type of work and therefore there is the
perception that listed companies can only look to the Big Four. This then begs the
question; ‘Do listed companies have a choice of auditor?’
Presently there is a lot of interest in the area of competition and choice in the audit
market. In 2006 the UK’s Department of Trade and Industry (DTI) and the Financial
Reporting Council (FRC) commissioned a report to Oxera into ‘Competition and
choice in the UK audit market’. Previously in 2003 the General Accounting Office
(GAO) in the USA made two reports to the US Senate on competition in the audit
market in the USA. Since the collapse of the last big firm Arthur Anderson in 2002,
there is much concern about what would happen if the present Big Four were to
become the Big Three.
The researcher did an extensive literature search on the area of choice in the audit
market and then sent questionnaires to the Chief Financial Officer of every company
listed on the Irish Stock Exchange. The researcher also interviewed a partner from a
mid-tier firm to discover their views and opinion on the topic.
It was found that more than 50 percent of respondents felt that there was currently
enough choice in the audit market; however, the literature and the interviewee
disagreed. Many respondents would not consider the mid-tier firms as their auditor
and many mid-tier firms were not well known to the respondents.
In conclusion it would seem that perception and reputation have a great deal of
influence over the choice of auditor. Therefore if changes were made in the audit
market to make information more freely available about the mid-tier firms’
capabilities, perhaps there would be more choice in the market that currently people
just do not know about. The competition authorities in this country and others would
need to consider choice in the audit market before there is no choice at all.