EU wants to open up audit market

(BRUSSELS) - After banks, rating agencies and hedge funds, the European Union set its sights Wednesday on opening up the company audit market, the accounting business tightly controlled by just a handful of giants.

"Seventy percent of the industry is in the hands of the big four in Europe," said EU financial services commissioner Michel Barnier as he announced a seven-week consultation.

"Ninety-nine percent in Britain is in the hands of the big four. We think that such a concentration can provoke systemic risks" to Europe's economy, he said.

"We need more competition and diversity."

The global companies he was referring to are Deloitte, Ernst and Young, KPMG and PriceWaterhouseCoopers.

The European Commission wants to establish "whether there are issues around the independence of audit firms, whether there are risks linked to a concentrated market, whether supervision at a European level might be useful and how best the specific needs of small- and medium-sized businesses may be met."

As a result of the banking crisis in particular, the commission said it "is unclear if auditors are truly detached and critical when examining the financial statements of a company when that same company is an existing or potential client for non-audit services."

Barnier raised the prospect of a similar approach to that taken in the long-running row over how to regulate hedge funds, which has seen Britain and Barnier's native France divided on whether it should be a national or European-wide agency that gives them their access -- or 'passport' -- to the market.

The "concept of a European passport for auditors should be explored further," he said.

European Commission Green Paper 
on Audit Policy - guide