Another scandal gives big four nightmares

Why? Because we can’t afford to lose another Big Four firm.

The regulatory implications and conflict of interests issues that would arise
could be nightmarish. That’s precisely why the UK department of trade launched
the Oxera report into audit competition and exactly why there’s so much at stake
in finding a solution.

But it’s also why events in Japan, where PricewaterhouseCoopers has been
barred from practicing as an auditor for two months, are so worrying. The
question is, of course, could it bring the firm down? The answer is probably no.
The rest of PwC has acted quickly to isolate the Japanese member firm and in
truth, it’s probably not as serious as the costs of losing Equitable or having
the firm’s reputation destroyed in the US. But what about the regulators’
actions? Were they too heavy handed, therefore risking the reputation of the
firm unduly?

Regulators elsewhere, such as the UK, must have wondered whether this could
be the one that did for the audit business all round the world? And if not this
one, there must be some concern about the regularity with which big scandals
occur, thus creating even more pressure for a contingency plan.

Last week Accountancy Age revealed that the Financial Services Authority
doesn’t have one yet and both the DTI and the Financial Reporting Council look
far from finding a way to improve auditor choice for the UK’s biggest companies.
Japan perhaps reminds us that the need is becoming ever more pressing.

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