Assessment of necessity for changes in the Baltic states listed companies' audit market from the EU audit regulation perspective

Straipsnyje pateikiami tyrimo, ES audito rinkos reformos kontekste vertinančio, ar ir kokie pokyčiai reikalingi Baltijos šalių listinguojamų įmonių audito rinkos charakteristikose (rinkos koncentracijoje, auditorių rotacijoje ir audito mokesčių atskleidime), rezultatai. Tyrime analizuota 2003–2013 metų Baltijos šalių listinguojamų įmonių audito rinkos koncentracija, auditorių rotacija bei audito mokesčių atskleidimo mąstas bei vertinta, kokiose iš nagrinėtų sričių yra reikalingi pokyčiai. Lietuvos, Latvijos ir Estijos audito rinkose Didžiojo ketverto audito įmonių koncentracija yra labai stipri. Tyrimo rezultatai parodė, kad į koncentracijos mažinimą nukreipti pokyčiai yra būtini visų trijų Baltijos šalių audito rinkose. Auditorių rotacija pilnai atitinka Latvijos 7 metų reikalavimą, 85,71 proc. atvejų tenkina Estijos 7 metų reikalavimą, 75 proc. atvejų atitinka Lietuvos 5 metų reikalavimą bei tenkina ES 10 metų rotacijos ribą. Pagal ES reikalavimus pokyčiai auditorių rotacijos srityje nėra reikalingi, tačiau Baltijos šalims pasirinkus griežtesnius reikalavimus, jie yra būtini Lietuvoje ir Estijoje. Didžiausių pokyčių galima tikėtis audito mokesčio atskleidimo srityje visose trijose Baltijos šalyse, nes tiriamu laikotarpiu šis mokestis buvo atskleistas fragmentškai, daugiau nei pusė tyrimo imties įmonių jo neatskleidė nei karto.Reform of the EU audit market was launched in 2002 as a part of overall EU transparency reformed aimed to facilitate to better functioning of internal financial market. The analysis of the EU and its member state‘s audit market highlighted major shortcomings of the market. The financial crisis of 2008–2009 further strengthened need for changes in this sector. The reform was aimed to clarify the role of statutory auditors, to strengthen their independence, and to enhance supervision. As a result, in April 2014 a new Auditing Directive was adopted in the EU Parliament. The key measures of new EU legal framework include: increased audit quality, enhanced transparency, better accountability, mandatory rotation of audit firms of public-interest entities (PIES), prohibition of certain non-audit services to audited PIEs, Cap on the provision of non-audit services to PIEs, single Market for statutory audit; market diversity and decreased concentration, enhanced supervision of the audit sector. Analysis of the results of the previous research revealed that European audit market of publicly traded companies is highly concentrated and dominated by the so called "Big Four" audit firms (KPMG, PwC, Deloitte and Ernst & Young). Most of the existing research covers pre-crisis periods or is conducted based on a example of one country; and only a few research papers which cover the EU situation up to 2011 has been found. However, the scope and complexity of changes of the new Auditing Directive on the practices of European auditing companies and audit market still need to be assessed. The purpose of this paper is to examine if and what changes in listed companies‘ audit market of Baltic States (Lithuania, Latvia and Estonia) in the context of the EU audit reform. In this paper an analysis of years 2003-2013 is conducted and three measures addressed in the Auditing Directive are assessed: concentration (measured as number of audited companies), auditors‘ rotation and disclosure of audit fees. To conduct an analysis a total of 247 audit reports for 23 listed companies have been analyzed. Results of the analysis reveal that Lithuanian, Latvian and Estonian listed companies‘ audit market is highly concentrated as the market share of ―Big Four‖ audit companies averages of 94.74 percent over the period of the analysis. The scope of required changes in level of concentration is difficult to assess as no measures of acceptable concentration in audit market is defined yet. Rotation of auditors in Latvian listed companies fully complies with both legal requirements of the national legislation (7 years for listed companies) and with the 10 years requirement of the EU. In Lithuania non-compliance with national 5 years rotation requirements was identified in 25% of the cases and in Estonia in 14.29% of the cases (for 7 years rotation requirement). Changes in practices of auditors‘ rotation are not expected in the Latvia, but are required in Lithuania and Estonia. According to the results of the analysis, the most significant changes are required in the area of audit fees disclosure. Such fees are disclosed inconsistently; more than a half of analyzed companies made no single disclosure of the audit fees over the analyzed period. Results of the analysis are consistent with the findings of the previous research. In order to better assess situation in Lithuania, Latvia and Estonia audit market for privately held companies should be assessed