Audit Market Concentration and Its Influence on Audit Quality

Abstract

This paper focuses on audit market concentration of listed firms which is characterized by an oligopoly of “Big Four” audit firms. Hence a state of the art analysis of the status quo of concentration measurement has been conducted on the audit market from an international perspective. Thereby risks and causes of concentration development have been assessed along with the current regulatory proposals of the European Commission (EC). After a discussion of conventional measurement methods of audit market concentration, our paper gives a review of previous empirical results of audit market concentration for EU and non EU-member states. Results show that EC reforms cannot clearly be related to increase audit quality but increasing transaction costs.