Audit expansion and the ‘butterfly effect’ - is it time for a new EU market structure?
The EU legislative and regulatory agenda is changing the scope of audit. Independent external reviews and assurance of non-financial information, including environmental, social and governance (ESG), data and artificial intelligence (AI) systems, have been introduced in EU legislation as a tool to ensure the proper implementation of the Green Deal and Digital Agenda’s key building blocks.
Accordingly, the requirement for audit is expanding to new domains, notably sustainability reporting and algorithm systems. Audit firms are transforming and developing from financial information experts into new areas of expertise to certify ESG information and the compliance of AI data and systems of the biggest digital platforms in line with the requirements of the Digital Services Act (DSA) and the Digital Markets Act (DMA). In the same way that financial audits contribute to building trust for the proper functioning of a market economy, these new types of audits will serve the public interest and play a key role in facing the challenges related to the development of more sustainable and more ethical digital economies. Auditors’ contribution to society will now go beyond investors and embrace consumers and citizens.
This paradigm shift for audit firms will necessarily impact the audit market in ways that might not have been anticipated. Is the EU audit ecosystem properly structured to fit these new dimensions? Will the EU audit market structure create unexpected risks and consequences?
Fabrice Demarigny is Global Head of Financial Markets at Mazars Group; and Chair of the ECMI Board. Comments received by Karel Lannoo and Apostolos Thomadakis are greatly acknowledged.