Financial auditing is one of the cornerstones of an effective capital market structure. When performed correctly, an independent financial audit provides investors with the security they need to effectively transact based on company disclosures. When this system fails, however, the results for investors and the economy as a whole can be devastating. In recognition of this danger, the market for financial auditing in the United States is regulated by a number of governmental and nongovernmental bodies charged with maintaining its health and effectiveness. But stakeholders within the U.S. market and government have criticized these regulators for failing to adequately respond to concerns lurking in the country’s financial auditing system. While audit reform can be an expensive and convoluted process, this Note argues that U.S. regulators can streamline the field’s development by monitoring and building upon the actions taken by U.K. regulators.
This Note describes the current audit regulatory structure employed by the United States and examines the most pressing concerns expressed by interested parties. It then analyzes the findings and proposals offered in the U.K. Competition and Markets Authority’s comprehensive report on competition and audit quality in the U.K. financial auditing market. This Note proposes that the conclusions of the Competition and Markets Authority’s report should serve as both a warning and a guide for domestic audit regulators. The United States is past due for a comprehensive examination of their financial auditing system. Using the U.K. findings as a guide will provide more immediate and relevant data for policymakers and regulators alike.