PIE statutory audit market concentration: evidence from Latvia
Date
2019
Authors
Saksonova, Svetlana
Rozgina, Ludmila
Journal Title
Journal ISSN
Volume Title
Publisher
University of Latvia
Abstract
The reform of EU audit legislation was adopted by the Council of the EU in April 2014. The legislation
consists of an audit Directive and an audit Regulation. The Directive applies to all statutory audits; the Regulation contains
specific requirements for the statutory audits of public-interest entities (PIEs). The Regulation aims both at enhancing
audit quality and at promoting competition in the audit market. Mandatory rotation, together with the incentives for joint
audit and tendering, as well as the prohibition of certain non-audit services to audit clients - requiring de facto that another
audit firm provides these services - are examples of measures that should make the market more dynamic and ultimately
less concentrated. The purpose of this study is to assess the concentration levels in the market for statutory audits of
PIEs in Latvia. The methods of the research are systematic, logical and comparative analysis, analysis of secondary data,
as well as expert method. Data on market shares is analyzed using the four firm concentration indicators. The principle
results of the study provide evidences about the high level of Latvia's PIE audit firms/networks market concentration, the
dominant share of non-audit revenue in total revenue for the 6 biggest market players, the auditing oligopoly in the PIE
market, the impact of the EU audit reform on the auditor-client relationships in the banking sector. Based on the findings
and results of the study, the authors propose a set of recommendations aimed to make the Latvian audit market more
transparent and less concentrated.
Description
Keywords
audit market , audit market concentration , audit firms , public-interest entities , Research Subject Categories::SOCIAL SCIENCES::Business and economics