The Measure of Concentration of Audit Markets in Public Interest Entities in the Czech Republic and Slovakia

Abstract

The aim of the paper is to determine whether the audit market for public interest entities in the Czech and Slovak Republic has been still concentrated and subsequently to determine the measure of concentration. The article consists of data including information from audit entities that perform statutory audit of public interest entities in the Czech Republic and Slovakia on timeline 2017–2020. On the level of competition is identified by the Herfindahl-Hirschman Index and the CR4 Index, using the revenues of statutory audit as a basis for calculating market shares. The results show that the Czech and Slovak audit markets for public interest entities have been highly concentrated, with a higher measure of concentration in the Czech Republic (HHI 0.25) than in Slovakia (HHI 0.23). The Big Four has had a market share of between 90% (Slovakia) and 95% (Czech Republic) in both countries, with the four firms have been providing up to 70% of all statutory audits within public interest entities. At the same time, KPMG and PWC have had the strongest market position. The paper provides new evidence on audit market concentration of public interest entities in the Czech Republic and Slovakia in the context of development in recent years, and thus can be the basis for a subsequent discussion of the consequences associated with high market concentration.