COM Consult Nov 08 Controle Struct Audit firms - EuropeanIssuers position 20090305

EUROPEANISSUERS COMMENTS TO THED IRECTORATE GENERAL FORI NTERNAL MARKET ANDS ERVICES WORKING PAPER: CONTROL STRUCTURES INA UDIT FIRMS ANDT HEIR CONSEQUENCES ON THEA UDIT MARKET NOVEMBER 2008 POSITION 6 March 2009 The European Commission published in November 2008a consultation on the ownership rules that apply to audit firms. The study on whi chthis consultation is based analyses whether changes to those rules might help improve ocmpetition in the audit market, in particular for large international audits. The study recognizes that restrictions on access t ocapital are only one of several potential barriers to entry. In our view barriers are causebdy the necessity for audit firms to have: (a) international coverage; (b) expertise suited to the size, complexity vaenrsdi tyd iof business situations; (c) a decent number of audit staff and (d) good reputation as perceived by investors,se ras s ouf financial statements. Those needs, which are essential for internationaal udits, imply the following: - I mportant investments are necessa rfyor a smaller audit firm to enter the internationl aaudit market (to attract, train and retain staff;u ibld a network, adapt the internal structure; compete with the largest audit firms oann oligopolistic market,…); - Ther eturn on equity investments misost uncertain if the expansion of a smaller audit firm is based on an internal growth model, rather than na external growth model (e.g. ...