PracticeAuditBig Four are ‘not too big to fail’

Big Four are 'not too big to fail'

Academice tells Brussels conference that focus should be on helping audit committee make more intelligent decisions when buying audit services

BIG FOUR auditors are not “too big to fail”, the Brussel conference on audit reform heard today.

Prof Michael Power from the London School of Economics told the conference that big audit firms were “probably” not “systemic” in nature, in the same way as banks, and that it was unlikely government would step in to save one on the edge of going bust.

Power said the lesson from the collapse of Andersen was that the crisis facing the audit market was relatively shortlived when a big firm collapsed, and that a global firm in trouble will break up into its national components to find a solution.

He added there was no real evidence of market failure as a result of Andersen’s demise.

He said he was not in favour of breaking up audit firms, but supported breaking up the audit.

Power concled that the critical issue was to help educate audit committees so they can make “more intelligent” decisions about buying audit services.

 

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