Washington (Aug. 1, 2003) -- Smaller accounting firms still face significant “barriers to entry” in their quest to capture business in the large public company audit market -- including lack of staff, technical expertise and global reach -- according to a study on consolidation and competition conducted by the General Accounting Office.
The 140-page GAO report said that the merger-mania of the 1980s and 1990s, coupled with the collapse of Arthur Andersen, increased the concentration of the audit market for public companies, with the Big Four currently auditing some 78 percent of all U.S.-based public companies and 99 percent of the market in terms of all public company sales.
As a result, the Sarbanes-Oxley Act, mandated that the GAO examine, among other issues: the factors contributing to the mergers, and implications of competition consolidation.
But accounting firm consolidation could parlay into a future ripple effect, resulting in a scaled-down competitive audit arena and, ultimately, fewer choices of audit firms for SEC clients.
The significant changes that have unfolded in the accounting profession “may have implications for competition and public company choice in the future,” the report said.
-- WebCPA staff
