The project will be carried out by Thuerheimer (principal investigator) and colleagues Tjibbe Bosman (VU Amsterdam) and Ziloy Croughs and Simon Dekeyser (KU Leuven).

Private equity and the audit profession

The FAR project (FAR056) focuses on the sharp rise in private equity (PE) investments in accounting firms in the Netherlands and abroad. Proponents see PE as an opportunity for audit firms to pay off legacy obligations and to invest in audit technology, quality management and new service lines such as sustainability reporting and assurance. Critics fear that stronger pressure on short-term financial performance may threaten auditor independence and professional integrity.

Research focus: partner, firm and client levels

There is little systematic evidence on how PE affects audit firms. The project first offers a descriptive analysis of small and mid-sized audit firms that attract PE investment. It then studies effects at 3 levels.

• Partner level: the project examines promotion and turnover patterns, characteristics of promoted and departing partners, and partners’ economic incentives.
• Firm level: it looks at the ability to attract and retain licensed auditors, technology investments, growth and changes in client portfolios and competitive position.
• Client level: it investigates whether PE investments affect audit quality and audit fees.

The study can potentially inform audit firms’ strategic decisions, support regulators and standard-setters in designing proportionate safeguards. It could also clarify whether and when private equity involvement affects audit quality and fees. This contributes to a more informed debate on ownership structures in the audit market and helps protect trust in auditing and financial reporting.

Masterclass for practitioners and regulators

As part of the project, the research team delivered a masterclass on 17 April to practitioners, regulators and standard-setters. This was organised by the Foundation for Auditing Research as part of their own outreach agenda. The session introduced the research agenda and discussed current developments in PE investments in audit firms and their potential implications for audit quality, governance and market dynamics.