BRUSSELS, July 15 (Reuters) - Scrapping restrictions on the ownership of company auditors is not a top priority for boosting competition in the sector, the European Union's executive arm said on Wednesday.
PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young audit the bulk of the world's blue-chip companies.
The European Commission launched a consultation last November into whether restrictions on owning auditing firms should be eased in a bid to increase the number of top-tier companies.
Few new auditors are set up due to restrictions such as those that bar banks from taking stakes in auditors, thus limiting the pool of new funds that can be tapped for expansion.
Smaller auditors also find it hard to break into the big league, dominated by about six firms, due to potential lawsuits from disgruntled shareholders of big audited companies.
"The current financial crisis makes it vital that we have a truly sustainable audit market, and the consultation results published today provide valuable insight into problematic issues," EU Internal Market Commissioner Charlie McCreevy said in a statement.
The Commission said 90 percent of respondents believe the EU should strive to reduce all potential barriers to the entry, growth and survival of audit firms.
"However, most of the respondents consider that lack of access to external financial capital is not the most important barrier preventing emergence of new players," it said.
"It would not, therefore, be sufficient simply to change the current rules on the control of audit firms; a comprehensive analysis on a greater number of priorities would be needed."
Auditors said it was clear no "single magic bullet" had emerged for McCreevy to use quickly, but some steps could be taken.
"The existence of a liability cap which is proportionate to audit fees would remove one of the potential barriers to mid-tier companies wanting to penetrate the large-tier market," said Jeremy Jennings, chairman of the European Contact Group, which represents the world's six biggest auditors.
Changing the rules on the control of audit firms could have little impact in any case, Jennings said.
It would still be hard to find people willing to invest in an audit firm due to the potential lawsuits they face from shareholders of the companies they audit.
"There is already furious competition between the large firms," Jennings said.
The Commission said respondents also favoured introducing governance rules for audit firms, as well as measures to address the lack of recognition of the audit capabilities of firms other than the four largest networks.
"The Commission will now carefully consider what actions can be taken at EU level to encourage new market players, whilst ensuring that auditors' independence and audit quality are not undermined," McCreevy said. Double click on the newslinks below for the relevant topics: For stories on regulatory issues (Reporting by Bate Felix in Brussels and Huw Jones in London; Editing by Rupert Winchester)