Auditing Essay Example | Topics and Well Written Essays - 2000 words - 2

Auditing - Essay ExampleThe Big 4 dominate the auditing industry to such an terminus that policy makers be worried about the set up of a possible reduction in their number. Questions such as pricing power, bargaining power, quality of audits, the liberty of audited financial reports and other matters that usually attend to an oligopoly has bedevilled government regulators and industry experts alike. This paper looks at some of the outstanding issues facing an industry with few market players, in particular on the possible scenarios when any of the Big 4 exits the market altogether for whatever reason.The Big 4 auditing and accounting firms, together with professional and accountancy organizations, are actively promoting positive reforms in both their accounting and reporting standards to improve credibility and confidence in audited financial reports. At present, these big four settle an oligopoly that dictated prices for their services. In classical economic theory, this is an imperfect competition where a few sellers can manipulate prices if they want to. Economists call it as the concent dimensionn ratio or C4 in which the four biggest firms control more than 60% of an industry similar to aircraft manufacturing and telecommunications.In fact, a report by the General Accounting assurance (GAO) of the US (renamed now to General Accountability Office in 2004) indicated concentration to be higher, approximately 78% of all the populacely-listed companies that constituted 99% of all public company sales (Bloom & Schrim 2005) and has serious implications with regards to the risks for collusion. The GAO report was commissioned in response to the passage of the Sarbanes-Oxley Act the previous year and also due to concerns about the effects of audit mergers and consolidation on competition, cost, quality, pricing and the cherished principles of auditor independence. Due to the few market players in an oligopoly, the action of one market participant tends to be known by