Reforming audit ownership rules to allow outside investment into the profession has been hailed by regulators as the silver bullet that could solve the worrisome issue of concentration in the audit market.

The main problem with the idea is that the auditors are the ones who need the most convincing.

When the European Union published an Oxera study extolling the benefits of outside investment last year, audit firms gave a very cool response to the findings, saying they had partner capital and bank debt in plentiful supply.

Undeterred, however, EU commissioner Charlie McCreevy said he would forge ahead with a consultation on the topic in an effort to push the debate along further.

McCreevy’s office said it would launch a public consultation in the first quarter of 2008, looking into why auditors, especially those in the mid-tier (supposedly the main beneficiaries of any law changes), have been hesitant to buy into the idea.

Informally, auditors have raised concerns that a relaxation of ownership rules could reduce the quality of audits, pose a risk to auditor independence and create conflicts
of interest.

‘Some have suggested that we should do away with ownership restrictions in audit firms and allow other players ­ not only audit partners ­ to invest in an audit firm. I want to hear more about both sides of the argument before deciding on the way forward,’
says McCreevy.

The consultation and its outcomes will be keenly monitored by key regulators from the world’s largest capital markets.

Financial Reporting Council chief executive Paul Boyle has enthusiastically backed the idea that investors injecting cash into the profession could encourage growth of mid-tier firms into larger networks with more global reach.

Ownership structures of firms have also caught the attention of US regulators, which have just begun hearings into issues affecting concentration of the US market.

International bodies such as the International Organisation of Securities Commissions, meanwhile, have begun discussing the future of the profession in relation to
the rules excluding ownership by non-professionals.

Momentum for changing the rules on ownership is clearly building, but concrete moves to re-write legislation to allow external investors into audit still look some way off. Firms seem hesitant and potential investors have yet to show strong interest.

With the launch of the EU consultation McCreevy, and his fellow international regulators, will be hoping to speed the process up and win over some of the doubters.