Audit market concentration across the world's G8 economies creates systemic risk to
international capital markets
The levels of audit market concentration across the world's eight largest economies are
dangerously high, with the Big 4 firms responsible for up to 99% of large public
company audits*, according to research by leading business and financial adviser Grant
Thornton UK LLP, UK member of Grant Thornton International.
"By failing to select non-Big audit firms, the world's largest public interest entities have,
in recent years, fed a systemic risk inherent within international capital markets which is
now so pronounced that in the event of the Big 4 becoming a Big 3, international
markets would fall into disarray", claims Steve Maslin, Head of External Professional
Affairs at Grant Thornton UK LLP and a member of the Assurance Advisory
Committee of Grant Thornton International.
Analysis of auditor concentration among the G8 economies revealed a high of 99% in
Italy, followed by the UK (98%), the US (97%), Canada (96%) and Russia (90%).
Japan revealed a lower auditor concentration of 84% - while the reasons are unknown,
increased activity is occurring in the Japanese audit market owing to PWC winding
down their affiliates, ChuoAoyama in June 2006 and Misuzu Audit Corp earlier this
year. Relatively lower concentration levels in Germany (83%) cannot be attributable to
any particular cause, whereas the G8's lowest concentration levels in France (61%) are
largely due to the implementation of French joint-auditing regulations which were
imposed in 1966. Across the G8 the Big 4 accounted for an average of 91% of the
market.
Commenting upon the UK report, Mike Starr, chief operating officer for Grant
Thornton International said: "We have long called for a market-driven solution. Our
concern is the well-being of the capital markets. Any solution that effectively only
protects an elite group, such as the Big 4, is not in the best interests of the capital
markets. Domination by a few can lead to a reduction of quality and can stifle the
innovation necessary to keep pace in a global economy."
Ends
For further information please contact:
Jonathan Geldart
Director of Marketing Communications
Grant Thornton International
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+44 (0)207 391 9530
www.gti.org
Or
Mike Starr
Chief operating officer
Grant Thornton International
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1 630 841 6507
Notes to editors
*The UK's FTSE 350 was used as a guide for the research. Only those companies with a
higher market capitalization than £347.1m, that of the lowest constituent in the FTSE
350, were compared across the G8 economies. Consequently the research illustrates that
of the 3305 companies worldwide with a market cap above £347.1m, an overwhelming
3015 (91%) were audited by a Big 4 firm.
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