The Dutch Authority for the Financial Markets (AFM) published an analysis on private equity in the audit sector, warning that audit firms partnering with private equity must keep the public interest in view and continue to prioritise the quality of statutory audits. Based on its data analysis, the AFM sees observable changes following private-equity entry and concludes that the risks outweigh the opportunities. The AFM notes that the market share of audit firms holding a regular licence that have private-equity investments has grown rapidly to around 30%, prompting a reassessment of impacts on a sector with a public-interest role. While recognising potential benefits such as scale advantages, added expertise, investment capacity and a stronger competitive position, it highlights risks including pressure for rapid growth and higher profitability, uncertainty around exit, leverage strategies that can backfire, and threats to independence and confidentiality. To preserve statutory audit quality, firms are expected to embed safeguards and conditions that provide continuous countervailing pressure against commercial incentives, with a key role for the supervisory board, alongside ongoing external pressure including supervision by the AFM.
Dutch Authority for the Financial Markets 2025-04-08
Dutch Authority for the Financial Markets flags rising risks as private equity-backed audit firms reach around 30% market share
The Dutch Authority for the Financial Markets (AFM) analyzed private equity in the audit sector, stressing the need for audit firms to prioritize public interest and quality. The AFM noted a rapid increase in market share of audit firms with private equity investments, now at 30%, identifying risks like growth pressure, profitability demands, and threats to independence. Firms are urged to implement safeguards and maintain oversight to counterbalance commercial pressures, with the supervisory board playing a crucial role.