ABSTRACT
This chapter addresses recent developments in the regulation of auditors. Together with other gatekeepers in financial markets, such as underwriters, financial analysts and credit rating agencies, auditors play an important role by providing independent assurance to investors that a company's financial condition is portrayed correctly and fairly. The independence and integrity of auditors hence seem crucial for a proper functioning of financial markets. The goal of the chapter is to analyse, from an economic perspective, recent developments concerning the regulation of auditors. It deals with the proposals made to limit auditor's liability and to relax legal form and shareholding restrictions respectively. With respect to auditors, Article 3 of the 2006 Audit Directive currently prescribes that in the European Union (EU) auditors must hold a majority of the voting rights in an audit firm and that a majority of suitable qualified workers control the management board.
