By Joanne S. Barry, Director, Communications Division

• Domestically and globally, there are only a few large firms capable of auditing large public companies, which raises potential choice, price, quality and concentration risk concerns.
•  Although the GAO found no evidence of impaired competition to date, the significant changes that have occurred in the profession may have implications for competition and public company choice, especially in certain industries in the future.
•  Existing research on audit fees did not conclusively identify a direct correlation with consolidation. The GAO found that fees have started to increase, and most experts expect the trend to continue as the audit environment responds to recent and ongoing changes in the audit market.
•  Research on quality and independence did not link audit quality and auditor independence to consolidation and was generally inconclusive.
• The GAO was unable to draw clear linkages between consolidation and capital formation but did observe potential impacts for some smaller companies seeking to raise capital. However, given the unprecedented changes occurring in the audit market, the GAO observes that past behavior may not be indicative of future behavior, and the potential implications may warrant additional study in the future, including preventing further consolidation and maintaining competition.
•  Finally, the GAO found that smaller accounting firms faced significant barriers to entry into the large public company audit market, including lack of staff, industry and technical expertise, capital formation, global reach, and reputation. As a result, market forces are not likely to result in the expansion of the current Big Four accounting firms. Certain factors could cause a further reduction in the number of major accounting firms.