FSA calls for inquiry into 'Big Four'
The UK's leading financial watchdog has hit out at the increasing lack of choice of large audit firms following the collapse of Andersen.
Saying it was now impossible for one of the remaining Big Four firms to fail, Sir Howard Davies, chairman of the Financial Services Authority, urged international competition authorities to investigate the restricted number of large firms.
‘The situation is most unfortunate, and we thought it was unfortunate when there was a Big Five,’ Sir Howard said.
Giving evidence before the Treasury select committee’s investigation of the financial regulation of public companies in the wake of accounting scandals in the US, Sir Howard’s comments came as the European Commission cleared Deloitte & Touche’s acquisition of Andersen’s assets in the UK.
Sir Howard complained that it was now very difficult for the FSA itself to find an independent member of the Big Four that was able to carry out work for the authority.
‘One or two times we have been unable to find an independent firm,’ he said.The FSA chairman also gave limited support to audit firm rotation, but only as fallback to other requirements.
Favouring the need for audit committees to make a ‘positive decision’ on the re-appointment of auditors, Sir Howard called for firm rotation every 15 to 20 years, as a ‘backstop’ against firms working for a company indefinitely.But he said the arguments against audit firm rotation were ‘less than wholly persuasive’.
In addition, Sir Howard called for ‘amplified guidance’ on whether an auditor should be allowed to carry out non-audit work for a client.
