Page 85 - Professional Services Networks
P. 85
The Handbook: Law Firm Networks
Step 5: Police behavior on the ground so far as possible.
Law firm networks would not be subject to vicarious liability under the principles set out since they have no
control over members.
Competition Regulations among the Accounting Networks
The accounting networks have a much greater competition with each other than with the legal network. The
reason is obvious. The Big 4 currently dominate the public company audits with more than 90 percent of the
market in most countries. The other networks are expanding and becoming comparable in their abilities to
provide these services. Regionally, many of the non-Big 4 have offices as large as the Big 4. They are
seeking their piece of the audit pie.382
The networks are therefore reaching out to governmental bodies to change the regulation to rotate auditors
and extend the rotation to these other networks. Their view is that this will increase quality and assure that
there is another independent review of the accounts of public companies. The European Group of
International Accounting Networks and Associations (EGIAN), a network of accounting networks and
associations, has recently filed a position paper with the EU outlining such a proposal.383 This position has
been enunciated by the chairman of the Public Company Accounting Oversight Board.384 Others have also
voiced their concerns of market dominance;386 whether these efforts will be successful has not been
decided.387
Multidisciplinary and Specialty Networks
If a multidisciplinary network has members that are law firms, it would be subject to the issues of law firms
discussed above. If some of its members are accounting firms, it would not be subject to accounting rules
because the network would not be supplying the auditing services.
382 Rose Orlik, Audit Referral: Big 4 Resigned, Mid-Tier Rejoice, ACCOUNTANCY AGE (July 29, 2011),
www.accountancyage.com/aa/news/2098052/audit-referral-resigned-mid-tier-rejoice; see also Nick Huber, The Concentration Battle, INT’L ACCT.
BULL. (May 11, 2011), www.blog-audit.com/wp-content/uploads/2012/03/e%CC%81tude-InternationalAccountingBulletin1.pdf.
383 EGIAN, www.egian.eu/eo/veuredocpublic.php?idd=157 (last visited Feb. 5, 2016).
383 Tammy Whitehouse, Doty Seeks Disclosure, Cooperation on Overseas Work, COMPLIANCE WEEK (July 01, 2011),
www.complianceweek.com/doty-seeks-disclosure-cooperation-on-overseas-work/article/206678/: “After shaking up U.S.
markets with talk of new audit reports and mandatory rotation, James Doty, chairman of the Public Company Accounting Oversight Board says the
board will soon consider another proposal that will require auditors to tell public companies how their audit work is parceled out to affiliate firms,
sometimes overseas.”
383 Plans Grow for European Audit Cop, WALL ST. J. (Oct. 12, 2010); see also Karen Kroll, Get This: Accounting Firms Are Backing More
Regulation, CFO WORLD NEWSLETTER (Feb. 15, 2011).
383 Rose Orlick, Accounting Competition Fight is On for Global Networks, ACCOUNTANCY AGE (June 9, 2011),
http://www.accountancyage.com/aa/analysis/2077856/fight-global-networks: “Little in the way of competition regulation exists on a global scale.
There have been rumblings from the World Trade Organisation about establishing an oversight body, though so far the debate has not transcended the
conference hall. Mazars’ partner David Herbinet paints an even gloomier picture for second-tier firms: "It is interesting that, despite the ongoing
investigations by the EC and the Office of Fair Trading, the Big Four firms continue to do as they please. If they were really worried, I would expect
them to stay under the radar.”
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Step 5: Police behavior on the ground so far as possible.
Law firm networks would not be subject to vicarious liability under the principles set out since they have no
control over members.
Competition Regulations among the Accounting Networks
The accounting networks have a much greater competition with each other than with the legal network. The
reason is obvious. The Big 4 currently dominate the public company audits with more than 90 percent of the
market in most countries. The other networks are expanding and becoming comparable in their abilities to
provide these services. Regionally, many of the non-Big 4 have offices as large as the Big 4. They are
seeking their piece of the audit pie.382
The networks are therefore reaching out to governmental bodies to change the regulation to rotate auditors
and extend the rotation to these other networks. Their view is that this will increase quality and assure that
there is another independent review of the accounts of public companies. The European Group of
International Accounting Networks and Associations (EGIAN), a network of accounting networks and
associations, has recently filed a position paper with the EU outlining such a proposal.383 This position has
been enunciated by the chairman of the Public Company Accounting Oversight Board.384 Others have also
voiced their concerns of market dominance;386 whether these efforts will be successful has not been
decided.387
Multidisciplinary and Specialty Networks
If a multidisciplinary network has members that are law firms, it would be subject to the issues of law firms
discussed above. If some of its members are accounting firms, it would not be subject to accounting rules
because the network would not be supplying the auditing services.
382 Rose Orlik, Audit Referral: Big 4 Resigned, Mid-Tier Rejoice, ACCOUNTANCY AGE (July 29, 2011),
www.accountancyage.com/aa/news/2098052/audit-referral-resigned-mid-tier-rejoice; see also Nick Huber, The Concentration Battle, INT’L ACCT.
BULL. (May 11, 2011), www.blog-audit.com/wp-content/uploads/2012/03/e%CC%81tude-InternationalAccountingBulletin1.pdf.
383 EGIAN, www.egian.eu/eo/veuredocpublic.php?idd=157 (last visited Feb. 5, 2016).
383 Tammy Whitehouse, Doty Seeks Disclosure, Cooperation on Overseas Work, COMPLIANCE WEEK (July 01, 2011),
www.complianceweek.com/doty-seeks-disclosure-cooperation-on-overseas-work/article/206678/: “After shaking up U.S.
markets with talk of new audit reports and mandatory rotation, James Doty, chairman of the Public Company Accounting Oversight Board says the
board will soon consider another proposal that will require auditors to tell public companies how their audit work is parceled out to affiliate firms,
sometimes overseas.”
383 Plans Grow for European Audit Cop, WALL ST. J. (Oct. 12, 2010); see also Karen Kroll, Get This: Accounting Firms Are Backing More
Regulation, CFO WORLD NEWSLETTER (Feb. 15, 2011).
383 Rose Orlick, Accounting Competition Fight is On for Global Networks, ACCOUNTANCY AGE (June 9, 2011),
http://www.accountancyage.com/aa/analysis/2077856/fight-global-networks: “Little in the way of competition regulation exists on a global scale.
There have been rumblings from the World Trade Organisation about establishing an oversight body, though so far the debate has not transcended the
conference hall. Mazars’ partner David Herbinet paints an even gloomier picture for second-tier firms: "It is interesting that, despite the ongoing
investigations by the EC and the Office of Fair Trading, the Big Four firms continue to do as they please. If they were really worried, I would expect
them to stay under the radar.”
- 73 -
