Fears are growing that the conservative approach by the UK audit profession to tackling the dominance of the Big Four firms could lead to heavy-handed intervention by powerful US regulators.

Hopes for significant reforms of the UK market were dashed this week as the Financial Reporting Council issued a report that disappointed many observers.

All eyes are now on a separate US intervention, with fears across the board being raised of a strong-arm approach. ‘My concern is that this debate will end up shifting to the US, rather than the UK, which will be sad because the UK was in front,’ said Jeremy Newman, BDO managing partner. ‘There is a greater danger that the US will choose a more interventionist approach,’ he said.

Richard Bennison, head of UK audit at KPMG, said: ‘The approach in the UK is market-led and is the right one. But the US has a history of excessive regulatory intervention - with Sarbox and s404. It will be interesting to see if they can take a principles-based and market-led approach,’ said Bennison.

The Market Participants’ Group, tasked by the FRC with looking into the issue, released 15 recommendations this week that were little changed from their interim report.

Attention is set to turn to separate EU and US plans for reform, with ownership rules changes in the EU on the cards and a more broad-ranging reform in the US. A special select committee chaired by former SEC chairman Arthur Levitt met for the first time this week.

The MPG report was met with disappointment by mid-tier leaders. ‘There was an opportunity to make real change, and give a strong signal to the market about unacceptable institutionalised prejudice, by taking stronger measures to deal with the requirement of banks and others to use certain audit firms,’ Newman said, adding that it had been ‘missed’.

Audit Quality Forum chairman Gerard Russell said the MPG moves might improve the audit market: ‘But they are unlikely to have any significant impact on the MPG’s stated objectives to improve choice.’