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Evaluation of the Risks of Collective Dominance in the Audit Industry in France

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  • Billard, Olivier
  • Ivaldi, Marc
  • Mitraille, Sebastien

Abstract

The financial crisis drew attention to the crucial role of transparency and the independence of financial certification intermediaries, in particular, statutory auditors. Now any anticompetitive practice involving coordinated increases in prices or concomitant changes in quality that impacts financial information affects the effectiveness of this intermediation. It is therefore not surprising that the competitive analysis of the audit market is a critical factor in regulating financial systems, all the more so as this market is marked by various barriers to entry, such as the incompatibility of certification tasks with the preparation of financial statements or consulting, the expertise on (and the ability to apply) international standards for the presentation of financial information, the need to attract top young graduates, the prohibition of advertising, or the two-sided nature of this market where the quality of financial information results from the interaction between the reputation of auditors and audited firms. Against this backdrop, we propose a legal and economic study of the risks of collective dominance in the statutory audit market in France using the criteria set by Airtours case and, in particular, by analyzing how regulatory obligations incumbent on statutory auditors may favour the appearance of tacit collusion. Our analysis suggests that nothing prevents collective dominance of the auditors of the Big Four group in France to exist, which is potentially detrimental to the economy as a whole as the audit industry may fail to provide the optimal level of financial information.

Suggested Citation

  • Billard, Olivier & Ivaldi, Marc & Mitraille, Sebastien, 2011. "Evaluation of the Risks of Collective Dominance in the Audit Industry in France," CEPR Discussion Papers 8417, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8417
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    References listed on IDEAS

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    Cited by:

    1. Avdasheva, Svetlana & Goreyko, Nadezhda & Pittman, Russell, 2011. "Abuse of collective dominance under the competition law of the Russian Federation," MPRA Paper 33742, University Library of Munich, Germany.

    More about this item

    Keywords

    Airtours criteria; audit industry; collective dominance;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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