UK chief accounting watchdog Paul Boyle has urged US regulators to open up rules on the ownership of audit firms in a bid to relieve the stranglehold of the Big Four.

Addressing the US Treasury Department’s advisory committee on the auditing profession, the chief executive of the Financial Reporting Council said that he considered a change in ownership rules would have the greatest long-term potential to reduce the level of risk related to the ownership of audit firms.

‘To increase choice it is necessary for one of the existing smaller firms to grow at a rapid rate, or for there to be a major new entrant. For either of these to happen substantial capital will be needed to fund the investment required.

‘The existing ownership rules are a major constraint on the potential rate of investment,’ Boyle said.

Boyle has become closely associated with the move to relax ownership rules after floating it in the UK and succeeded in persuading the European Commission to conduct a study on the issue.

Boyle dispelled concerns raised by the large firms about the risks to auditor independence and audit quality arising from changes in the ownership of the firms.
‘I believe that some of those concerns are overstated and that others are capable of being mitigated,’ Boyle said.

The US committee, chaired by former Securities and Exchange Commission chairman Arthur Levitt, is looking at competition and concentration issues among others.

The committee has also heard testimony from academics over the dire state of university-level accounting education in the US.

Ira Solomon, a professor at the University of Illinois, said: ‘There is a shortage of academics who are able to relate to the most recent issues from the practice world and translate them into the classroom. This is one of those issues that’s going to create a negative cycle if we don’t get on top of it quickly.’