A decade of EU audit reform – successes, setbacks and what should be done next

The audit profession plays a vital role in ensuring the integrity of financial reporting, thus safeguarding the interests of investors, lenders and other stakeholders in public-interest entities PIEs. However, following the 2007-08 global financial crisis, scrutiny of auditing practices intensified, leading to the European Commission’s 2014 Audit Reform which aimed to enhance transparency, limit conflicts of interest, promote competition and strengthen supervision.

Despite these efforts, the audit market has witnessed a significant decline in terms of the number of auditors and firms, alongside persistent market concentration dominated by just a few major players. This concentration poses risks to competition, accountability and the EU’s strategic autonomy. Additionally, the evolving landscape of digitalisation and sustainability reporting is introducing new challenges and responsibilities for auditors, necessitating a shift in skills and competencies.

To address these issues, it’s essential for the EU to implement structural reforms to foster competition, update existing regulations to include non-financial audits, enhance regulatory oversight, promote technological innovation and ensure auditors receive adequate training in emerging areas. By taking these proactive steps, the EU can restore trust in the auditing profession, improve audit quality and ensure that the interests of all stakeholders are effectively protected.

Apostolos Thomadakis is Head of Research at ECMI and Research Fellow at CEPS.