PracticeAuditOxera: ‘outside funding will not harm independence’

Oxera: 'outside funding will not harm independence'

EU Oxera study says it is possible for firms to obtain outside funding and protect independence

Fears that opening up the audit profession to outside investment will
compromise independence have been downplayed in an EU-commissioned study on
audit firm ownership.

In its report on audit firm ownership, research consultancy Oxera told the EU
that current ownership rules, blocking non-accountants from investing in audit
firms, raise the cost of capital for these firms by up to 10%.

Oxera found that opening the profession up to outward investment would reduce
this cost and could be managed in a way that prevented any conflicts of
interest.

‘A closer look at the decision-making processes within audit firms indicates
that alternative ownership and management structures, where the control of audit
firms is with external investors, are unlikely to significantly impair auditor
independence in practice,’ Oxera said in its report.

The findings of the study could pave the way for the EU to remove ownership
restrictions and open up the audit profession to billions of pounds of outside
investment.

Some senior figures, however, are sceptical about the impact that outside
finance will have on the profession.

Sir Mike Rake, the highly respected former chief executive of KPMG and now
chairman of BT, has said outside funding is not the panacea for concerns about
competition and choice in the audit market. Rake has argued that building
international networks and integrating practices is far more important and will
take 10 to 15 years to achieve.

Further reading:

See
the full EU Oxera report here

Oxera backs reform of audit ownership
rules

Related Articles

Is predictive analytics the end of the annual audit?

Audit Is predictive analytics the end of the annual audit?

3d Martin Herron, MHA MacIntyre Hudson
Auditors ‘in the dock’ over Carillion as report calls for Big Four break-up

Audit Auditors ‘in the dock’ over Carillion as report calls for Big Four break-up

1w Emma Smith, Managing Editor
PCAOB sanctions former Deloitte Turkey CEOs over altered documents

Audit PCAOB sanctions former Deloitte Turkey CEOs over altered documents

2w Alia Shoaib, Reporter
KPMG South Africa to review past audit work amid fresh scandal

Audit KPMG South Africa to review past audit work amid fresh scandal

1m Alia Shoaib, Reporter
FRC introduces £10m sanctions for Big Four firms

Audit FRC introduces £10m sanctions for Big Four firms

1m Alia Shoaib, Reporter
Ukraine’s PrivatBank files $3bn claim against PwC

Audit Ukraine’s PrivatBank files $3bn claim against PwC

2m Alia Shoaib, Reporter
Grant Thornton to exit FTSE 350 audit market, citing Big Four dominance

Audit Grant Thornton to exit FTSE 350 audit market, citing Big Four dominance

2m Alia Shoaib, Reporter
Big Four dominate FTSE 250 audit market in Q1 rankings

Audit Big Four dominate FTSE 250 audit market in Q1 rankings

3m Alia Shoaib, Reporter