An announcement two weeks ago by the US Treasury office to conduct a study into the shrinkage of the audit market has taken the business community by surprise.

The man called in to do the job is the formidable Arthur Levitt, a former SEC chairman and now a senior adviser with the New York-based Carlyle Group.

What’s happened?

The appointment of Levitt could be strategic on the part of Henry Paulson, the US Treasury Secretary, who announced the moves. Paulson could have chosen a young firebrand, keen to push the boundaries and really stir things up in the US, all the while nicely making a name for himself.

Instead, Paulson chose 52-year-old Levitt, who has already made his reputation. But that’s not to say he would be less inclined to rock the boat. Levitt has always had the need to protect investors (about 50 million in the US) at heart. What may worry the Big Four is that he has had a hostile attitude to the profession in the past.

In the 1990’s he effectively forced the firms to divest themselves of their consultancy arms, arguing that they had conflicts of interest with their audit functions. He also angered the firms in 2002 when he said they could not be trusted to regulate themselves. But that was before the Public Accounting Oversight Board came into existence.

He said: ‘There is no present significant oversight of the profession: I don’t think the accountants can do it on their own. I think they’ve been insensitive to the importance of the public interest.’

In 2002, he wrote his book, Take on the street: what Wall Street and corporate America don’t want you to know – in which he detailed his struggle with the big accounting firms to introduce new rules which would ensure auditor independence. American corporate life is of course, after Sarbanes-Oxley, a different place today.

What’s going to happen?

With the help of co-chairman, former SEC chief accountant Donald Nicolaisen, and the the appointment of a larger panel, the study will probably commence next autumn, with the results released a year later.

But this could be tricky, as this would coincide with the elections’ cycle, during which it would be difficult to move proposals through Congress.

US Chamber of Commerce senior vice president, Michael Ryan said this week that the group needs ‘action now’.

‘A lot of people have spent a lot of time talking and thinking. My concern is that we’re going to lose the opportunity to act,’ Ryan said.