Chief Financial Officers: More Audit Competition, Please

A national survey of CFOs and senior controllers/comptrollers by Grant Thornton believe that the benefits of greater competition between audit firms (lower audit fees, higher quality) outweigh the potential costs (investor unease about auditor switch, negative market reaction to switch). About five-ninths of those surveyed felt that there was too few audit firms large enough to provide competition on SEC audits. Almost three-fifths of CFOs believed that negative market reaction to auditor change was overrated.

I can certainly understand why CFOs and controllers would like a break from the run-up in audit fees of the last several years. At the same time, I am not sure that competition necessarily would help quality on SEC audits; the pool of auditors sufficiently skilled to perform SEC audits is far from limitless and "audit shopping" for lower audit fees sounds too much like the sort of behavior that created the Enron, WorldCom, etc. accounting scandals earlier this decade.