Marius Gros

Lobbying and Audit Regulation in the EU

Abstract In this paper, we analyze comment letters submitted in response to the European Commission (EC) Green Paper on audit policy. We find that consistent with the theory of incentives and the presence of information asymmetries between rule-making bodies and interest groups, the highest participation within the consultation process came from auditors and preparers of financial statements. Additionally, our results suggest that these interest groups exhibit different strategic lobbying behaviors in terms of employing more self-referential arguments than other interest groups. Moreover, we provide evidence that self-referential argumentation strategies are more influential when expressing opposing views, whereas conceptually based argumentation strategies are more influential when expressing supporting views. We contribute to a more detailed understanding of the role that lobbyists and argumentation strategies played in the recent EU audit policy reform, and we infer that lobbying activities might have led the EC to moderate its proposals to obtain interest groups’ support.

Reform des Abschlussprüfermarkts: Erkenntnisse der Betriebswirtschaftslehre und evidenzbasierte Regulierung

DeutschVor dem Hintergrund der nun nach nahezu vierjahriger Debatte beschlossenen Reform der Abschlussprufung wird im vorliegenden Beitrag der gegenwartige betriebswirtschaftliche Forschungstand dargestellt und daraufhin untersucht, inwiefern die Erkenntnisse der Betriebswirtschaftslehre mit den nun getroffenen Beschlussen im Sinne einer evidenzbasierten Regulierung zu vereinbaren sind. Diesbezuglich werden zwar uneinheitliche Ergebnisse erzielt, eine Vorteilhaftigkeit der beschlossenen Masnahmen kann aber zumindest nicht eindeutig belegt werden. Allerdings unterstutzen die Forschungsergebnisse in ihrer Tendenz die im Verlauf des Regulierungsprozesses vorgenommene deutliche Abschwachung der zuvor erwogenen strengeren Masnahmen. Die Erkenntnisse der betriebswirtschaftlichen Forschung stehen grundsatzlich in Einklang mit den Ergebnissen, welche auch die Ende 2010 durchgefuhrte Konsultation zum Grunbuch lieferte. Aufschluss uber die Vorteilhaftigkeit der beschlossenen zusatzlichen Regulierung werden jedoch erst Untersuchungen geben konnen, die sich nach der Umsetzung der Reformmasnahmen gezielt mit deren konkreten Auswirkungen auseinandersetzen. EnglishAfter a four year long debate on audit policy, the EU agreed on several regulatory measures. This article discusses if and to what extent the enacted measures can be considered as an example of evidence based regulation. We discuss empirical research findings on non-audit services, mandatory rotation and joint audits. Research findings are quite mixed but in the summary can be considered as not supportive of the measures proposed in the EU Commission’s original Green Paper of 2010. Notwithstanding, prior research findings are to some extent in line with the changes and developments observed during the four year lasting regulatory process. In comparison to the Green Paper of 2010 as well as to the regulatory drafts of 2011, the final measures were clearly softened and are, hence, at least more in line with prior research findings. Moreover, the empirical findings published in the business economics literature, generally, are consistent with the results of the EU Commission’s consultation on the Green Paper of 2010. The consultation also revealed mixed views of the stakeholders with regard to the proposed measures but the majority of the stakeholders opposed or did not support the EU Commission’s proposals. However, the question whether or not the enacted measures will be beneficial for audit quality requires further research, in particular post implementation studies.

Goodwill Impairment Test Disclosures Under IAS 36: Disclosure Quality and its Determinants in Europe

The European Securities and Markets Authority (EMSA) criticizes the low disclosure quality and boilerplate disclosures in the accounting for goodwill among European listed companies, but it does not identify possible causes. Prior research also finds generally low compliance with disclosure requirements but usually does not consider disclosure quality or systematically examine the drivers of the observed levels of either compliance or disclosure quality. In this study, we analyze compliance and disclosure quality among European listed companies. We find low levels of compliance and disclosure quality and both are positively associated with firm size, goodwill intensity, enforcement and free float. In addition, disclosure quality is positively affected by board skills and company growth but negatively affected by proprietary cost. Our findings are of interest to regulators and enforcers who intend to increase the quality of disclosures. Moreover, we direct the attention of capital market participants to large differences in disclosure quality and the associated firm and governance characteristics.The European Securities and Markets Authority (EMSA) criticizes the low disclosure quality and boilerplate disclosures in the accounting for goodwill among European listed companies, but it does not identify possible causes. Prior research also finds generally low compliance with disclosure requirements but usually does not consider disclosure quality or systematically examine the drivers of the observed levels of either compliance or disclosure quality. In this study, we analyze compliance and disclosure quality among European listed companies. We find low levels of compliance and disclosure quality and both are positively associated with firm size, goodwill intensity, enforcement and free float. In addition, disclosure quality is positively affected by board skills and company growth but negatively affected by proprietary cost. Our findings are of interest to regulators and enforcers who intend to increase the quality of disclosures. Moreover, we direct the attention of capital market participants to large differences in disclosure quality and the associated firm and governance characteristics.