In my previous article, Audit Reform in Australia: Independence and Accountability, I looked at the issues raised by Treasury’s options paper, Regulation of accounting, auditing and consulting firms in Australia, released on 1 July 2026 [1]. That paper raises real questions about how Australia can strengthen audit independence, accountability and competition without unintended consequences, and one of the clearest of those questions is what today’s audit market concentration means for genuine client choice.
That leads to a practical question: what role should independent specialist audit firms play in a stronger and more diverse audit market? In my view, they have an increasingly important role, because a healthy market needs genuine choice, clear independence, specialist expertise and firms able to invest in the people and technology that high-quality audits require.
A clearer separation of roles
One strength of the specialist audit model is its simplicity. An accounting firm can provide accounting, tax, advisory and other business services, while a separate audit firm independently audits the financial information and provides assurance. The roles are clear to the client and to those who rely on the audit.
Australia already has detailed independence requirements, and those safeguards matter. Even so, when audit and other commercial services sit within the same organisation, the arrangements can be harder for clients and the public to understand. A specialist model makes the separation of roles more visible: the audit firm focuses on audit and assurance rather than also pursuing the client’s tax, bookkeeping, consulting or technology work.
That does not mean specialist firms automatically deliver better audits, or that multidisciplinary firms cannot deliver high-quality work. It simply means the separation of roles is easier to explain, while allowing a specialist auditor to work alongside the accountant’s existing client relationship rather than compete with it. If you’re weighing up a large firm against an independent specialist, our comparison of the two models covers the practical differences.
Audit market concentration limits genuine choice
Australia needs an audit profession with depth and diversity. Large global firms have an important role, but the market also needs strong mid-tier, regional and independent specialist firms.
Treasury’s options paper notes that audit services to large Australian entities are highly concentrated: the four largest firms audit about 96 per cent of the top 200 entities and 76 per cent of the next 300, based on 2022 figures. Concentration of this kind can constrain choice and increase market vulnerability if a major provider reduces its audit activity.
Independent and specialist firms can broaden choice, strengthen competition and maintain audit capability outside the largest metropolitan markets. Regional access also matters in a country where businesses, not-for-profits and regulated entities operate across a wide geographic area.
Specialist expertise does not require common ownership
Modern audits can require input from tax specialists, valuers, technology and cybersecurity professionals, actuaries and other experts. But those specialists do not necessarily need to sit inside the same commercial organisation as the auditor.
An audit firm can employ specialists, develop expertise internally or engage independent external specialists on an arm’s-length basis. What matters is that arrangements are transparent and properly managed, with appropriate controls around confidentiality, independence, quality and professional responsibility.
Separation does not have to mean isolation. An independent audit firm can still access the expertise a complex audit requires without sharing ownership or broader commercial objectives with the adviser. Arm’s-length arrangements provide a practical way of combining independence with specialist capability.
Proportionate regulation, not weaker regulation
Stronger governance, quality management and regulatory oversight carry costs. The real issue is how those costs are applied across firms of different sizes and structures.
If the same fixed governance, reporting, levy and compliance requirements are imposed on every audit firm regardless of size, complexity or risk profile, the unintended result could be fewer independent providers. Smaller specialist firms do not have the same scale over which to spread large fixed costs, and some capable firms may decide statutory audit is no longer commercially sustainable.
That could mean less competition, reduced regional access and greater market concentration than exists today. The answer is not weaker regulation, but proportionate regulation. Requirements should reflect the size and complexity of the firm, the public-interest significance of the entities it audits, and the level of risk involved.
Technology creates an opportunity
Data analytics, automation and artificial intelligence are changing what is possible in audit. These tools can help auditors examine larger populations of transactions, identify unusual patterns and direct more attention to higher-risk areas.
For a specialist audit firm, technology investment can be particularly focused on tools and processes that improve assurance work.
The opportunity is not simply to make audits faster, but to improve their quality and depth. AI and analytics can help identify anomalies and interrogate data, but they do not replace professional scepticism, interpretation or judgement. Responsibility for the audit opinion remains with people, so human review, data security, validation and accountability all remain fundamental.
From outsourcing to an independent audit relationship
Using an external auditor is often described as “outsourcing the audit,” but a better question may be: who is the right independent specialist auditor for our clients?
Many accounting firms want to deepen client relationships through tax, forecasting, structuring, technology and broader business advice. Maintaining a high-quality in-house external audit practice, however, requires ongoing investment in specialist people, systems, independence processes, training and technology. Working with an independent specialist audit provider allows the accounting firm to continue developing its advisory relationship while an independent firm performs the assurance role.
A practical perspective on audit market concentration from National Audits Group
At National Audits Group, we see this discussion through the lens of a business that specialises in audit and assurance rather than operating across a wide range of accounting and advisory services. That shapes our perspective, but the argument is not that every audit should be undertaken by a specialist firm, or that multidisciplinary firms do not have an important role.
Australia benefits from having both. We need firms capable of undertaking the largest and most complex engagements, but also mid-tier, regional and specialist providers that offer different operating models, increase competition and give clients meaningful alternatives.
The test for the current reform process is whether it can strengthen the audit profession without unintentionally narrowing the market. A strong audit market should give clients genuine choice, maintain access to specialist expertise, support responsible investment in technology and make independence easy to understand. Ultimately, the value of audit is not the report itself, but the confidence people can place in the information behind it.
Frequently asked questions about audit market concentration
What is audit market concentration, and why does it matter in Australia?
Audit market concentration refers to how much of the audit work for large entities sits with a small number of firms. When a small number of firms carry out most large-entity audits, it can constrain client choice and leave the market more exposed if one provider steps back from audit work.
Do independent specialist audit firms deliver better audits than large multidisciplinary firms?
Not automatically. Both models can deliver high-quality audtis. However, an independent specialist firm may offer a particular advantage where independence is a priority: its focus on audit makes the separation from other services clearer and easier for clients and stakeholdres to understand and assess.
Can a specialist audit firm still access technical expertise like tax, valuation or cybersecurity specialists?
Yes. Specialists do not need to sit inside the same organisation as the auditor. Audit firms can employ specialists directly or engage independent experts on an arm’s-length basis, provided the arrangement is transparent and properly managed.
Will stronger audit regulation reduce the number of audit providers in Australia?
It does not have to, provided the regulation is proportionate. Applying the same fixed compliance and levy requirements to every firm regardless of size or risk could make statutory audit commercially unsustainable for smaller specialist firms, reducing competition and regional access.
If you’d like to understand how NAG’s independent, specialist model fits within Australia’s audit market, see our financial statement and AFS licensee audits or get in touch with our team.
Steven Watson, Managing Director, National Audits Group. View Steven’s profile.
Reference
1. Australian Government, The Treasury, Regulation of accounting, auditing and consulting firms in Australia – Options Paper. Consultation closed 12 August 2026. consult.treasury.gov.au/c2026-781711