View more on these topics

Europe looks to curb power of big four audit firms

The European Commission is to publish proposals to curb the power of the big four accountancy firms by forcing them to abandon their consultancy work and to share audit work with smaller rivals.

The draft green paper, compiled by European internal markets commissioner Michel Barnier, aims to restore trust in financial reporting in the wake of the financial crisis.

According to the Financial Times, companies with balance sheets of more than £850m would be forced to hire two auditors to conduct a joint-audit of their books, including one by a firm other than Deloitte, KPMG, Ernst & Young or PricewaterhouseCoopers.

The plans will also stop auditors working for a big company for more than nine years, in order to stimulate competition.

The draft proposal, seen by the Financial Times, says non-audit work is a “source of conflict of interest” and says: “Audit firms of significant dimension should… not be allowed to undertake other services unconnected to their statutory audit function such as consultancy and advisory services.”

In July, the Office of Fair Trading referred the audit market to the Competition Commission over concerns the dominance of the big four is hitting competition.

In March, the FSA referred several auditors to auditing bodies after uncovering serious failings in client asset reports. The move followed a consultation paper on improving client asset reports last September triggered by a review in 2009 which found that auditors were providing unchanged or “clean” reports despite significant breaches of client asset rules.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Hmmm…

    But don’t the FSA ask these big four to carry out checks on financial institutions on their behalf?

    How many millions, did I hear you say?….

    Doesn’t our very own FSA supporting Treasury Minister come from a PWC background to boot?

  2. BCCI & Enron spring to mind! Both received glowing audit reports. Both failed miserably.
    The Financial gymnastics that accountants dreamt up to record Liabilities as assets, and revaluation of non existent plant, machinery and buildings to bolster the balance sheet was not far short of criminal. Yet behold the audit teams certified their accounts. Morons.

  3. The current system of corporate auditing does not work. It simply cannot work and the reasons are obvious. Read why:

    http://theelucidation.blogspot.com/

  4. Discussed this issue coming about 2 years ago – watch this space – the big 4 will eventually be held accountable for audits of firms/banks that have failed during the financial crisis

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com