NOT EVEN HALFWAY through November, and already it is proving a tough month for high-profile firms.

PwC is really up against the wall, pilloried by negative press for not one but four unfortunate-looking audits.

It is hard to pick the most embarrassing. The high-profile collapse of MF Global uncovered suspicious handling of clients' funds, raising questions as to why PwC failed to flag up the problem.

Not new news, but headline-grabbing nonetheless, the Accountancy and Actuarial Discipline Board announced it will see PwC in court (the International Dispute Resolution Centre, to be exact) over alleged failings related to JP Morgan.

Unfortunately for PwC, those failings tally closely with MF Global-related accusations. The Financial Services Authority claims reports logged by the firm in respect of JP Morgan Securities' compliance with Client Asset Rules were sub-standard for the six years to 31 December 2008.

The Client Asset Rules draw strict lines between company and client money to prevent one bleeding into the other. A UK PwC spokesperson insisted procedures have been tightened up since the JP Morgan case, and pointed out MF Global is audited by the firm's US arm.

Nevertheless, it is an unfortunate concurrence that sharpens the focus on procedures and controls.

And we're not done there.

Sub-prime lender and former client Cattles is bringing action against PwC which could cost the UK number-one firm £840m, The Telegraph recently reported.

PwC was also recently forced to defend its audit of collapsed nightclub operator Luminar, saying: "Our opinion in Luminar's annual report for the year ended 26 February 2011 clearly highlighted the severe issues the company faced in relation to its ongoing business. We do not include emphasis of matter paragraphs lightly in audit opinions."

Not a stellar month by anyone's estimation.

But peers should not revel too much in PwC's discomfort, as the embarrassing public meltdown of camera maker Olympus has dragged Ernst & Young and KPMG's Japanese arms into its boiling wake.

Olympus has held up its hands to financial mismanagement, after its short-lived chief executive Michael Woodford asked questions about an unusually high consultancy fee paid during an acquisition, and was promptly sacked.

The company admitted that since the 1990s it has been "deferring the posting of losses on investment securities" and using advisors' fees and purchase funds set aside for acquisitions to smooth rough patches in its accounts.

Those in the accountancy-watching world have inevitably turned their gaze to the auditors, asking why no one flagged up Olympus's innovative use of funds.

KMPG Azsa, Olympus's auditor until June 2009, signed off its client's accounts in March of that year despite disagreements over the way it recorded the acquisition of medical equipment maker Gyrus, The Financial Times reported.

Tsuyoshi Kikukawa, then Olympus chairman, admitted in an email to Michael Woodford that Ernst & Young ShinNihon was engaged as a result of this dispute with KPMG, but E&Y also failed to flag up the problem.

The Japan Institute of Certified Accounts is to investigate the two firms' roles in the scandal.

Deloitte is the only Big Four player not to have hit the headlines for questionable work in recent weeks, but it shouldn't get too comfortable with its ephemeral halo.

The whole of Europe and the US have fixed their gaze on audit, and firms are facing an in-depth UK Competition Commission investigation, while waiting anxiously for the final audit reform paper from Brussels expected in late November.

It is not a good month to be accused of audit shortcomings, but at least the Big Four will have lots of practice fighting their corner.

LAST WEEK'S Audit Inspection Unit reports threw light on work at the top six firms, and optimists said they showed slight improvement.

A sub-board of the Financial Reporting Council, the AIU said this year's findings pointed to "as good, or even slightly better" audits, and institute members agreed they are "happy" with the results.

However, the AIU itself said it was hard to identify trends from such a small pool of reviews, suggesting celebrating 'as good or better' results - despite the number of unsatisfactory audits climbing - is a step too far.

Director Andrew Jones had ready excuses for the firms' continuing weakness in certain areas. Their size and de-centralised structure made it hard to achieve root-and-branch improvement, he said, while in some cases, last year's AIU recommendations had not yet filtered through to audits in the most recent review.

The ICAEW too was quick to offer explanations for shoddy audit work. Executive director of professional standards Vernon Soare described the problems as "isolated incidents" that are "not worrying" and "certainly not indicative of systematic or endemic failure".

This is despite the fact that year in, year out, the top six struggle to dissect management claims with appropriate scepticism, and are universally pulled up on tricksy issues like fair value and goodwill impairment.

When the two prongs of industry supervision - institutes and the FRC - are lining up to pat firms on the back for their lacklustre audit reviews, stakeholders should be worried.

Oversight and retribution are currently shared between them, and a forthcoming FRC consultation could see even more power concentrated in institutes' hands, as the Audit and Actuarial Disciplinary Board is considering offloading some of its responsibilities onto the ICAEW and its ilk.

When accused of a curious willingness to defend the firms, Jones said the AIU will not tolerate poor audit work, and is "holding firms' feet to the fire by going back review their work". He pointed out that the public reports are just the tip of a finger-wagging iceberg, and a much more detailed review is sent to the firm in question and its clients.

Vernon Soare displayed a similar confidence in audit inspectors, saying the body has been delegated power by the secretary of state and "has a serious job to do". He argued overseers often struggle to demonstrate objectivity but nevertheless, it would not be in their interest to 'find' improvements without supporting evidence.

The recent Office of Fair Trading decision to refer audit to the Competition Commission gave institutes another chance to nail their colours to the mast. CIMA said the market is "currently competitive", making the referral "arguably unnecessary under present circumstances". The ICAEW and ICAS were similarly reticent, questioning whether the commission had the teeth to impose successful remedies.

With the rest of the profession lining up to demand greater competition and investors concerned about Big Four market capture, the reluctance of industry bodies to get behind the zeitgeist is telling.

Institutes need the big firms to put graduates through their training programmes - just ask the ICAEW, which lost Ernst & Young learners to ICAS in 2000, reducing its student count by around 400 a year. This could make them reluctant to go against firms' best interests, and must make them think twice on touchy issues like competition.

The FRC too has been accused of regulatory capture, as it fills its boards with current and former members of the accounting elite. Accountancy Age recently reported on new appointments to the Financial Reporting Review Panel, of which a comfortable six in 13 came from the Big Four.

The plurality of institutes plus the FRC and its various boards are often cited as proof of thorough and overarching industry supervision. However, with top firms heavily over-represented on the regulatory scene and a complex web of funding and inter-dependence linking the various bodies, it is arguable that the pluralistic landscape is just variations on a theme, with no true independence or will to scrutinize problems.

Of course, top accountants make their way to firms' highest echelons, and it is these minds that we want working on tough issues like audit standards and regulation. However, their value is arguably diminished when the institutes and FRC boards resemble an old boys knees-up, and we should bear this in mind when examining the trappings of regulatory oversight, of which the AIU is just one feature.