This paper studies earnings management in a European context. More specifically. the effects of three factors on earnings management within Europe are studied: member state audit environment. audit firm quality and presence in international capital markets. The national audit environments within Europe vary strongly in terms of independence rules and auditor liability. Hence, it can be expected that the restrictions imposed by national audit environments on earnings management vary. However, there are two factors that can mitigate the national audit environment effect: Big Four audit firm quality and a company's reliance on international capital markets. Using data for the period 1992-2000 from listed firms in three EU countries with clearly distinct audit environments (France, Germany and the UK). we have the following main findings. First. a stricter audit environment reduces the magnitude of earnings management. irrespective of the type of auditor (Big Four audit firm or non-Big Four audit firm). Second. there is no evidence of an international Big Four audit quality effect in Europe. Third, a company's reliance on international capital markets does not limit its earnings management.The evidence provided in this study is relevant for the current debate in the European Union on the harmonisation of auditing. For the comparability of earnings. not only is the standardisation of financial reporting important but also the standardisation of enforcement mechanisms. as embodied in the national audit environment and the quality of audit firms. The results of this study suggest that the enforcement of financial reporting still varies strongly across member states of the EU.

In 2001 the International Auditing Practices Committee (IAPC, now the International Auditing and Assurance StandardsBoard (IAASB)) commissioned research on the determination and communication of moderate assurance. This research was published in IFAC research monograph No. 1 (2002). Part of this research involved surveying the types of assurance services undertaken by 56 assurance firms from 11 different countries, the levels of assurance at which these assurance services were generally provided, and for those services provided as moderate assurance services, the reasons why. This paper re-analyses this data and extends the IFAC research report (2002) by examining the differences between the types of assurance services (other than historical financial statement assurance) and levels at which these assurance services are provided by the former Big 5 audit firms compared with the non-Big 5 audit firms. Information was also collected on 166 moderate assurance engagements provided by these participating assurance firms. The determinants of the level of assurance for these assurance service engagements were identified and differences between the Big 5 and the non-Big 5 audit firms are reported.

This paper investigates the usefulness of a dynamic analysis of audit‐market competition in terms of audit‐market‐share mobility, audit‐firm entry, and audit‐firm exit. These dynamic measures of market structure are compared between the more regulated German audit market and the more liberal Dutch audit market. Prior research on audit market structure has focused on static analyses in terms of seller concentration of single national audit markets. By using data on the number of auditors as the measure of audit‐firm size, this paper covers all firms active in the two audit markets in the period 1970 to 1994. The results indicate that the more liberal Dutch audit market has the highest dynamic measures of market structure and the highest concentration. Hence, the results show that high concentration can go hand in hand with high‐market‐share mobility and high audit‐firm entry and exit. The results for market‐share mobility also hold for an analysis including only the largest audit firms. The paper therefore concludes, that compared with a static seller concentration analysis, an analysis of audit‐market dynamics provides a better description of the degree of competition in audit markets.

The central theme in Power's 1997 book on the audit society is the proliferation of audit activity within the United Kingdom (UK) and North America. The most important joint development with the audit explosion is the rise of internal control systems. Auditing has shifted from auditing outcomes to auditing systems, and internal controls have become the subject of public policy debates on the regulation of corporate governance and the regulation of auditing. Power states that there is much confusion in practice about what (effective) internal controls actually are. This paper makes a similar argument with respect to internal control research. Internal controls are studied in various areas of accounting research, covering very different concepts, and studying controls at different organizational levels. As a result, the cross‐fertilization between the various types of internal control research is limited. Also, most internal control research in accounting is not conducted within the context of wider corporate governance issues. Hence, many claims about the value of internal control systems for corporate governance still need to be studied.

The resource-based view of the Jirm is a recent strategic management theory that seeks to identify the resources that may provide firms with a sustainable competitive advantage. This paper has two purposes. First, the paper relates strategic management arguments to parallel lines of reasoning in industrial organization theory and argues that strategic regulation is a major source of sustainable competitive advantage. The second purpose of the paper is to report the results of an empirical test of the resource-based theory on the basis of a longitudinal data set on the postwar history of the Dutch audit industry.A key determinant of this history proves to be strategic regulation, which stimulates demand for audit services and protects rentproducing resources.