The Effects of Mandatory Audit Firm Rotation on Big 4 and Mid-Tier Audit Firmss Market Shares and Client Importance

Bleibtreu, Christopher; Stefani, Ulrike

doi:10.2139/ssrn.2981659

Cited by 2 publications

(2 citation statements)

References 42 publications

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“…Comunale and Sexton (2005) developed the model which shows that client retention has little effect on long-term market share whereas mandatory rotation will prompt Big-N auditors to increase their effort to obtain new clients to sustain market share. Bleibtreu (2018) found that mandatory audit rotation weakens the Big-4 audit firms' market dominance only if the non-Big-4 audit firms' initial market shares are sufficiently large. If those firms have small initial market shares, rotation leads to higher concentration.…”

Section: Mandatory Audit Rotation and The Audit Market Concentrationmentioning

confidence: 97%

Mandatory audit rotation and audit market concentration – evidence from Poland

Indyk¹

2019

EBR

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The new audit regulation came into force in Poland in 2017 and imposed mandatory audit rotation. The new regulation aims to strengthen the auditor's independence but it might also affect concentration on the audit market. The aim of this paper was to analyse whether mandatory audit rotation has a potential to reduce the audit market concentration in Poland. The sample included 198 capital groups with the parent company listed on the Warsaw Stock Exchange. The own compilation was prepared based on the audit opinions which included information about appointed audit firms in the period 2011-2017 (1,386 observations in total). The paper includes the analysis of audit tenures, their length, frequency of changing the audit firm and direction of the changes (to Big-4 or to Non-Big-4). The results showed that the biggest capital groups tend to appoint Big-4 audit firms and if they change auditor-they choose another firm from the Big-4. Additionally, the high number of short-term tenures (up to five years) suggests that Big-4 firms have strong bargaining power and they benefit more from the rotation of the clients rather than from their retention. The findings significantly contribute to the hypothesis that mandatory audit rotation will not reduce the concentration on the audit market in Poland. The findings might be valuable for the regulators and supervisory authorities responsible for the monitoring of the concentration level on the audit market.

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Section: Mandatory Audit Rotation and The Audit Market Concentrationmentioning

confidence: 97%

Mandatory audit rotation and audit market concentration – evidence from Poland

Indyk¹

2019

EBR

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“…In the UK context, however, concerns about a lack of T A B L E 2 A summary of reviewed papers, presented in chronological order, on audit oversight and audit competition to the mandatory rotation, the market share of Big 4 audit firms increases, suggesting more concentration in the market, not less. Bleibtreu and Stefani (2017) further argue that mandatory rotation has been adopted in the EU and not in the United States because the market share of the Big 4 is relatively higher in the latter.…”

Section: Independent Oversight and Audit Competition In Europementioning

confidence: 99%

Independent oversight of the auditing profession: A review of the literature

2021

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This paper reviews the literature on the independent oversight of auditing from 2003 to 2018 and provides several research opportunities for filling the identified gaps in that literature. Our review classifies the literature into three themes: (1) the development of independent audit oversight, (2) the effects of independent audit oversight and (3) the interface between the independent audit oversight authorities and the global audit networks. The paper finds different effects of the independent audit oversight. Positively, it enhances the capital markets by adding more credibility to the published information. Auditors become more conservative about accepting or continuing to work with high‐risk clients. At the same time, while audit fees have increased as a result of the additional requirements of independent audit regulation, non‐audit fees from audit clients have decreased significantly. Negatively, independent oversight has increased audit concentration and resulted in insufficient choice of auditors in most audit markets.

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The Effects of Mandatory Audit Firm Rotation on Big 4 and Mid-Tier Audit Firmss Market Shares and Client Importance

Cited by 2 publications

References 42 publications

Mandatory audit rotation and audit market concentration – evidence from Poland

Mandatory audit rotation and audit market concentration – evidence from Poland

Independent oversight of the auditing profession: A review of the literature

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