Professor Marleen Willekens presented to and discussed with the Board of Accountancy Europe as well as with the Chairs and members of working groups the findings of her team’s recent study on the early effects of the Audit Reform.
The overall objective of the Audit Reform was to strengthen confidence in companies’ financial information and to improve audit quality. To achieve this, the new audit legislation aimed, amongst others, to make the top end of the audit market more dynamic and enhance auditors’ independence.
The study suggests that the top end of the audit market is becoming more dynamic thanks to more rivalry and increased auditor switches. However, Professor Willekens highlighted that the study presented preliminary evidence and it was therefore too early to draw any conclusions or make policy decisions based on it. This is due to, amongst other limitations as listed in the study, the fact that the study was carried out very early after the implementation of the new legislation and also due to limitations resulting from the studied sample. In particular, the study is based on the market data on stock-listed PIEs meaning that it leaves non-stock listed PIEs out of the analysis, which could create a certain bias.
Although the study indicates the earlier listed movements in the market, it does not examine whether these were caused by the Audit Reform. Importantly, the study does not analyse the market changes’ impact on audit quality.
To conclude, Professor Willekens stressed that before considering any further changes to the audit legislation, a more long-term analysis based on a richer set of data was needed to see the full effects of the Audit Reform.
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