US follows British lead on audit choice

Forward thinking: Arthur Levitt

The US is to embark on UK-style measures aimed at opening up choice into the concentrated audit market by requiring companies to disclose agreements which predetermine the appointment of firms.

The suggestion was one of 13 recommendations from the US Treasury advisory committee on the auditing profession, which examined issues of competition, together with training, the structures of firms and their finances.

It suggested that smaller firms should be encouraged to grow, while public companies disclose details of agreements with third parties, which could limit their choice of auditor.

The Market Participants Group led the way with such recommendations in the UK.

The US group, led by former Securities and Exchange Commission chairman Arthur Levitt, also recommended audit firms appoint independent partners charged with governance oversight, with duties similar to those of a non-executive director.

Suggestions were also made for construction of a plan that would rehabilitate and preserve a large auditing firm facing a collapse.