Network crisis for small firms

Under the terms of the European eighth directive, networks could have to
define the relationship between member firms.

Firms may have to prove they are not liable for each other’s mistakes, as the
EU seeks to define more clearly the relationship between members.

‘Smaller networks are burying their heads in the sand,’ said Jane Howard,
partner and accounting specialist at insurer Reynolds Porter Chamberlain.

While the larger member networks, such as the Big Four, have the resources to
deal with this situation, Howard fears others are ignoring it.

EU sources said that the directive would mean firms making decisions about
their relationships under various criteria. A firm could be classed as being
within an audit network according to one country’s understanding of the rules,
yet other countries might not accept that this is the case.

A senior Brussels source said the issue of defining networks was still
uncertain and it was unknown what criteria would make the directive.

But network members will have to hammer out their relationships. ‘Decisions
will have to be made – comply or disband,’ Howard said.

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