This report gives a brief overview of differences in audit education between
Europe and the United States. Although harmonization efforts have attempted
to bring audit education into line, differences still exist. Since the
educational preparation of auditors influences the quality of audit services
and the nature of competition in an audit market, research into differences
in audit education and the effects of those differences will provide more
insight into how audit markets function. First, we describe the educational
requirements for auditors in the European Union (EU). Thereafter, the most
profound differences with audit education in the US are presented. Finally,
we give some suggestions for research in this field.
Audit education within Europe is fairly harmonized. For EU Member States, the EU Eighth Directive specifies the professional qualifications auditors are required to have to conduct statutory audits. Under the Eighth Directive there are two possible routes to achieve qualification as an auditor. We refer to these routes as the educational route and the experience route. To follow the educational route candidates (1) must attain university entrance level, (2) complete a course of theoretical instruction, (3) undertake practical training (of at least three years) and (4) pass an examination of professional competence which includes both a test of theoretical knowledge and a test of practical application. In the experience route, candidates may omit the first two (three) of these requirements if they have seven (15) years of professional experience in the fields of finance, law and accountancy. They always need to pass the examination of professional competence.
All EU Member States have established an educational route. The minimum period of required on-the-job experience within the educational route is three years for Austria, Belgium, Denmark, France, Italy, Luxembourg, the Netherlands, Portugal, Spain and Sweden, four years for Germany, five years for Finland, Ireland and the United Kingdom and eight years for Greece. However, only four EU Member States have an experience route for qualification as an auditor. In Spain there is an experience route requiring eight years of professional experience in the fields of finance, law and accountancy and three years of practical experience in auditing. In the United Kingdom candidates are required to have 12 years of professional experience. Furthermore, in Finland and Germany candidates are required to have 15 years of professional experience, although this may be reduced if candidates have at least three years of practical experience in auditing.
In addition to achieving a qualification, auditors may be required to participate in programs of continuing professional education. Although in all EU Member States auditors are required to maintain their professional capabilities to some extent, the requirements regarding continuing professional education are only codified in Belgium, Finland, France, Germany, Ireland, the Netherlands, Spain, Sweden and the United Kingdom.
Regarding audit education within the EU, some interesting observations can be made. Firstly, the level of education of licensed auditors seems to be fairly similar in Europe. Licensed auditors have an academic (or comparable) degree and have undertaken a minimum amount of practical training. Also, the examination of professional competence is fairly uniform. Second, there are significant differences in how education for auditors is organized. A crucial difference concerns the involvement of universities or public accounting firms in the education of auditors. For example, in the Netherlands, qualification requirements have a major influence on the educational programs of universities, whereas in Belgium, Germany or the United Kingdom, qualification requirements only have a modest influence on the educational programs of universities. In these countries, the preparation for the auditor examinations is to a large extent provided for by public accounting firms. Within the EU, there is also great variety in the involvement of practitioners in the university education of auditors. In some countries universities employ practitioners on a part-time basis and have close ties with auditing practice, whereas in other countries universities employ full-time academics and have almost no ties with auditing practice.
A comparison of audit education in the EU and the US leads us to the following similarities and differences. Firstly, in the US there is an educational route to qualify as a CPA, but there is no experience route. Within the educational route, qualification requirements have a differing influence on the educational programs of universities and the degree of specialization into the field of accounting and auditing. Some universities adapt their programs to the CPA Examination, whereas other universities do not prepare students specifically for the Exam. These students then participate in private auditing courses which prepare for the Exam. This situation can also be observed in several countries in the EU. Furthermore, US universities mainly employ full-time academics to teach in the accounting curriculum, whereas in several EU Member States universities employ practitioners on a part-time basis and have close ties with auditing practice.
Secondly, candidates in some states in the US are not required to have practical experience to become licensed as a CPA. By contrast, all EU Member States have established a practical experience requirement. Thirdly, as regards continuing professional education, CPAs are required to participate in programs of continuing professional education. As previously mentioned, participation in such programs is not required in every EU Member State.
A general conclusion with respect to audit education in Europe and the United States is that the main differences are in the organization of educational programs. However, these differences are not unequivocal. Even within the EU, where harmonization has taken place on the basis of the Eight Directive, there are some major differences between EU Member States as regards the organization of audit education.
Research in the field of cross-national comparisons of regulations, and also in the field of audit education, mainly have been conducted from a practical viewpoint. From an academic point of view a number of much more interesting research topics might be put on the agenda. The following questions are still unanswered and can be investigated by comparing differences in audit education between the EU Member States. In what stage of their study should students specialize in the field of accounting and auditing? What is the most effective strategy regarding the organization of audit education: hire only full-time academic teaching staff, hire only part-time academic teaching staff with more or less full-time appointments in audit practice, or hire both academics and practitioners? If a combination of academics and practitioners is desired, how should the educational tasks be allocated between these groups? How desirable is harmonization of audit education? What variables cause differences between countries with respect to the question whether or not to focus on education or experience routes to the final auditors' exam? What is the relative success of auditors following the educational route versus the experience route? Empirical research with respect to these questions will provide more insight into the consequences of regulation and consequently in the functioning of audit markets and the nature of competition in audit markets.
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Auditor's Report, Summer, 1996