Lancaster EPrints

And then there were four : a study of UK audit market concentration – causes, consequences and the scope for market adjustment

Beattie, Vivien and Goodacre, Alan and Fearnley, Stella (2003) And then there were four : a study of UK audit market concentration – causes, consequences and the scope for market adjustment. Journal of Financial Regulation and Compliance, 11 (3). pp. 250-265. ISSN 1358-1988

Full text not available from this repository.

Abstract

While concentration measures are a good indicator of market structure, the link with competitiveness is more complex than often assumed. In particular, the modern theory of industrial organisation makes no clear statement regarding the impact of concentration on competition - the focus of this paper is concentration and no inferences are made about competitive aspects of the market. The extent and nature of concentration within the UK listed company audit market as at April, 2002 and, pro forma, after the collapse of Andersen is documented and analysed in detail (by firm, market segment and industry sector). The largest four firms held 90 per cent of the market (based on audit fees) in 2002, rising to 96 per cent with the demise of Andersen. A single firm, Pricewaterhouse-Coopers, held 70 per cent or more of the share of six out of 38 industry sectors, with a share of 50 per cent up to 70 per cent in a further seven sectors. The provision of non-audit services (NAS) by incumbent auditors is also considered. As at April 2002, the average ratio of non-audit fees (paid to auditor) to audit fees was 208 per cent, and exceeded 300 per cent in seven sectors. It is likely, however, that disposals by firms of their management consultancy and outsource firms, combined with the impact of the Smith Report on audit committees will serve to reduce these ratios. Another finding is that audit firms with expertise in a particular sector appeared to earn significantly higher nonaudit fees from their audit clients in that sector. The paper thus provides a solid empirical basis for debate. The subsequent discussion considers the implications for companies and audit firms of the high level of concentration in the current regulatory climate, where no direct regulatory intervention is planned.

Item Type: Article
Journal or Publication Title: Journal of Financial Regulation and Compliance
Uncontrolled Keywords: Audit firm mergers ; Auditor concentration ; Concentration ratios
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 66345
Deposited By: ep_importer_pure
Deposited On: 17 Sep 2013 09:05
Refereed?: Yes
Published?: Published
Last Modified: 08 Sep 2017 00:29
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/66345

Actions (login required)

View Item