egian european group of international accounting networks and associations what is egian? 21...
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EGIANEuropean Group of InternationalAccounting Networks and Associations
What is EGIAN?
21 MembersEurope
Global Combined turnover €9.4 bn €25.7 bn
Combined staff 106,000 311,000
Big Four average €21.0 bn
Largest – PwC €26.1 bn
EGIANEuropean Group of InternationalAccounting Networks and Associations
European Institutions
European Commission – Civil Service
European Parliament – Elected
Council of Ministers – Member States
EGIANEuropean Group of InternationalAccounting Networks and Associations
Background-Audit Reform- Green Paper - Proposal
2008 crisis-where were the auditors?
Bank losses, 2007 to 2009 – clean opinions
Intrinsic weaknesses were not reported
Role of audit needs to be reviewed
EGIANEuropean Group of InternationalAccounting Networks and Associations
Big Four market shares
Market Caps EU27 G8 US China
FTSE 350-eq 83% 84% 85% 14%
€115 m + 79% 80% 81% 14%
€55 m + 63% 75% 75% 14%
EGIANEuropean Group of InternationalAccounting Networks and Associations
Market Stagnation
Market shares (Global revenues)2004 2009
PwC 24% 23% Deloitte 22% 23% E&Y 19% 19% KPMG 18% 17% BDO 4% 4% GTI and RSM 3% 3% Praxity-Mazars-MRI 2% 3% Crowe Horwath 2% 2% Baker Tilly 2% 3%
EGIANEuropean Group of InternationalAccounting Networks and Associations
Service sectors-largest firms
Baker McKenzie $2.1 bn
S&P $2.6 bn
Black Rock $4.7 bn
McKinsey $6.6 bn
PwC $26.1
EGIANEuropean Group of InternationalAccounting Networks and Associations
Comparison-audit and law firms
Global market shares
Law-top 50 Audit-top 24
Biggest 5 19% 75%
Next biggest 5 28% 20%
The rest 53% 5%
EGIANEuropean Group of InternationalAccounting Networks and Associations
EU-Big 4 country market shares–FTSE 350 equivalent
100%-Czechia, Estonia, Hungary, NL, Slovakia 97% - Italy, UK 96% - Portugal 94% - Sweden 89% - Denmark 87% - Spain 82% - Germany 58% - France
EGIANEuropean Group of InternationalAccounting Networks and Associations
Issues for the Regulators at the top end of the market
Are Big 4 too “close” to their clients? Scepticism? Lack of choice Systemic risk posed by large companies Impact on capital markets of Big 4 collapse Market stagnation – UK FTSE 100 – 50 years Smaller firms cannot now challenge without regulatory intervention What should that be?
EGIANEuropean Group of InternationalAccounting Networks and Associations
Scope of Green Paper-Draft Proposals
Five themes
“Clarification” of the role of the auditor Reinforce independence of the profession Support the development of SME’s Reinforce international cooperation, and Promote change in the audit market structure
EGIANEuropean Group of InternationalAccounting Networks and Associations
Proposals for regulation to change the audit market
Large PIE – Market Cap - €1 bn +
Joint audit – one big, one small (less than 15% audit fees from large PIEs)
Audit engagement not to exceed 9 years Regular tendering Limit non-audit services to large PIE audit
clients (size and scope)
EGIANEuropean Group of InternationalAccounting Networks and Associations
EGIAN activities
Position paper on audit reform Response “work group” Meetings with MEPs, Commission, country
ambassadors, other European organisations Contacts with FEE and national audit institutes Country initiatives Relations with BDO and GTI Six-monthly full meetings
EGIANEuropean Group of InternationalAccounting Networks and Associations
Strategy considerations
Nexia’s global turnover same as Big 4 increase Extrapolate over ten years – where? Audit requirements for smaller companies
reducing Is audit a “sustainable” option for EGIAN
members? What sort of network do you want to be? Size is relevant If top end of market opens up – mergers,
breakaways from Big 4, considerable
investment? Are we ready?
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