As the efforts to save the world economy reached fever pitch last week, among the statements issued by the US Treasury was the report of a panel asked to make recommendations on the audit profession.

For some it would have been a disappointing report. Jointly chaired by former Securities and Exchange Commission chairman Arthur Levitt and Donald T Nicolaisen, there were hopes the recommendations would include measures to protect auditors from the kind of catastrophe suffered by Andersen. Something along the lines of limiting auditors’ liability.

But there was nothing like that included in the report. Observers in the end were merely grateful that protection was recognised as an issue even though no steps were advised.

Lobbyists pointed to the co- chairmen, who is well known as being unsympathetic to the audit profession. As one told Accountancy Age: ‘What was needed were people with totally open minds. The battle in the end was would they even recognise that there was an issue.’

Levitt has been aggressive in his approach to audit firms. In June this year an interview appeared in the Dutch magazine De Accountant in which he expressed his liking for ‘audit only’ firms, a replay of his views that firms were conflicted by running audit along side other advisory services.

‘The profession is better managed today than ever before. But once again, this is a moving target. The firms are aggressively getting back into consulting services. I think there is a role for an audit only firm. We also need greater transparency to understand what condition a firm is in. We need their firms to provide fully documented audits of their own operations. They don’t do it at the present time, but I think that clearly is coming.’

At the beginning of September the US Center for Audit Quality issued a warning to the Treasury in Washington saying that it was failing to do enough to avert the risk of litigation destroying a large firm. The center was furious that the panel’s recommendations would not address auditor protection even though the issue had been discussed.

Cynthia Fornelli, director of the center, insisted that liability capping should be among the proposals the panel would make.

‘If this liability concern is not addressed, many of the committee’s other recommendations will prove unworkable due to the current litigation context.

‘And as we pointed out in our first letter, we believe that fulfilling the committee’s mandate to address “the sustainability of the public company auditing profession” includes meaningfully tackling this issue,’ she warned.

The report included up to 30 recommendations for dealing with the audit profession.

On the concentration of the audit market and the competition issue there was advice that regulators should monitor the ‘potential sources of catastrophic risk and the creation of a mechanism to ‘rehabilitate’ large audit firms in crisis.

The report followed through on Levitt’s belief that audit firms should publish annual reports (something already underway for a number of years in the UK) and said engagement partners should put their personal signature on an audit to improve accountability.

The panel also recommended that independent members should be appointed to audit firm boards with full voting rights.

In terms of recommendations there was nothing to tackle the belief that giving audit firms more protection was a route to encouraging other players into the market for large public company audits.

Observers believe the key members of the Treasury panel were reluctant to even acknowledge this as an issue let alone recommend a course of action. Because the final report does, it is being viewed as a step forward, however tentative that step may be.

Despite the concern over the report, lawmakers in the US are unlikely to do anything with it. Elections are a month away so it will be left to a new regime, once there is some calm around the credit crisis, to consider whether to take the recommendations in the report and turn them into action.

That may be some time away which might, in turn, create the breathing space necessary to force auditor protection and liability capping back on to the agenda.

A Democrat regime in the Whitehouse and at the Treasury could be persuaded to ignore the recommendations produced for a Republican government and find their own route forward on the audit profession.