Internationalizing the French auditing profession.

Abstract: The objective of this paper is to trace the development of the French auditing profession, the commissaires aux comptes, focusing on the appearance of the large Anglo-American audit firms on the French market. The French audit market has always shown a number of peculiarities, including the continued importance of a number of local audit firms. The French auditing profession finds its roots in late 19th century company law that introduced an obligation for companies to release audited financial statements. The profession became regulated in its modern form in the 1960s. This paper attempts to explain the growing impact of the international audit firms on the French auditing profession. It also demonstrates how local professionals and the French state reacted to these developments.

INTRODUCTION

Most European audit markets have witnessed significant changes over recent decades. A striking development that has elicited academic curiosity is the growing impact of the large Anglo-American audit firms on local audit markets. The development of audit markets has been well studied in many venues, generally from an economic perspective using contracting theory as the framework for the analysis of developments in the supply of audit services [e.g., Watts and Zimmerman, 1983, Craswell et al., 1995; Holmes and Zimmer, 1998]. The existence of large accounting firms is partially explained by economies of scale. Summarizing the relevant literature, Meuwissen [1999] concluded that large audit firms obtain cost advantages and receive fee premiums, probably due to product differentiation.

Part of this research focuses on audit-market concentration as the largest international firms have declined in number from the "Big Eight" to the now "Fat Four," expanding their market shares in the process [Pige, 2003; Ramirez, 2003]. One of the first studies in this area was Zeff and Fossum [1967], followed by others that also focused on the U.S. Moizer [1992] observed how European research lagged behind, that little academic work was done in the area of the European audit-services market in Europe previous to 1992.

Eventually audit-market structures were studied in, among others, the U.K. [Moizer and Turley, 1987], The Netherlands [Buijink and Maijoor, 1991], Denmark [Christiansen and Loft, 1992], Belgium [Weets and Jegers, 1997], and Sweden [Wallerstedt, 2001]. On the French market, Piot [2001] highlighted the barriers to competition between different categories of audit firms (the "Big Six," large national firms, and local audit firms) on the basis of the characteristics of their client portfolios. Gonthier-Besacier and Moizer [2001] focused on the current perception of audit firms in France and found no significant differences between the "Big Five" and large local firms.

Most of the studies mentioned center on an analysis of empirical data relating to audit clients, fees, or number of professionals. Our objective, however, is to understand how and why the large Anglo-American firms became dominant in France, as in most other countries. The issue is worth pondering. Many consider France to be a country that vigorously defends its own culture, language, and modes of organization. The progressive introduction of the international firms means either that the French abandoned their traditional positions or that the international firms adapted to the French culture, language, audit approach, etc. These issues are explored in this paper.

LITERATURE REVIEW AND RESEARCH QUESTIONS