RegulationCorporate GovernanceBoyle champions relaxed ownership

Boyle champions relaxed ownership

Chief executive of the FRC, Paul Boyle, urges US regulators to open up rules on ownership of audit firms

UK chief accounting watchdog Paul Boyle has urged US regulators to open up
rules on the ownership of audit firms in a bid to relieve the stranglehold of
the Big Four.

Addressing the US Treasury Department’s advisory committee on the auditing
profession, the chief executive of the Financial Reporting Council said that he
considered a change in ownership rules would have the greatest long-term
potential to reduce the level of risk related to the ownership of audit firms.

‘To increase choice it is necessary for one of the existing smaller firms to
grow at a rapid rate, or for there to be a major new entrant. For either of
these to happen substantial capital will be needed to fund the investment
required.

‘The existing ownership rules are a major constraint on the potential rate of
investment,’ Boyle said.

Boyle has become closely associated with the move to relax ownership rules
after floating it in the UK and succeeded in persuading the European Commission
to conduct a study on the issue.

Boyle dispelled concerns raised by the large firms about the risks to auditor
independence and audit quality arising from changes in the ownership of the
firms.
‘I believe that some of those concerns are overstated and that others are
capable of being mitigated,’ Boyle said.

The US committee, chaired by former Securities and Exchange Commission
chairman Arthur Levitt, is looking at competition and concentration issues among
others.

The committee has also heard testimony from academics over the dire state of
university-level accounting education in the US.

Ira Solomon, a professor at the University of Illinois, said: ‘There is a
shortage of academics who are able to relate to the most recent issues from the
practice world and translate them into the classroom. This is one of those
issues that’s going to create a negative cycle if we don’t get on top of it
quickly.’

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