Functional deficits in the audit market
The key findings at a glance
The audit market has fundamental functional deficiencies that hinder effective competition in the "public interest entities" market segment. This negatively impacts audit quality and poses risks to the high public interest in financial market stability, investment and growth.
The problems of high market concentration and barriers to entry will not solve themselves: An adjustment of the market design is urgently needed and politically agreed. In their 2021 coalition agreement, the governing parties stipulated that they would tackle high market concentration. The EU Commission also recently launched a round of consultations on reforming the European legal framework for the audit market.
Various reform options are available for solving the competition problems. They promise to promote market diversity, quality and financial market stability. Possible measures include joint audits based on the dual control principle, state appointment of auditors, capping of market shares and competition-sensitive criteria for the award of public audit contracts.