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Tuesday, 23 July, 2002, 13:43 GMT 14:43 UK
UK MPs call for auditor clamp-down
DTI head office
The DTI may stop short of the toughest reforms
A cross-party committee of British politicians has recommended that big auditing firms be probed on competition grounds, as part of a series of tough proposals on the accountancy industry.

In the first of two reports this week on rebuilding faith in accountants, the Treasury Select Committee also backed the idea that firms should rotate auditors every five years.

The committee's report has no direct influence on government policy, and is tougher than the line expected out of the Department of Trade and Industry (DTI), which is to publish its conclusions on Wednesday.

The DTI is believed likely to force accountants to be more open, and may abolish self-regulation, but should stop short of recommending that firms break themselves up.

Since the collapse of Enron late last year, and a string of mainly US-based accounting scandals since then, the role of company auditors has come in for severe criticism.

The committee has taken a somewhat tougher view.

It said that the regulatory environment in Britain was very different to that of the US, but it would be "dangerously complacent" to assume Britain was immune to scandal.

Current regulation of accountants, most of which is handled by the industry itself, was was "cumbersome and excessively complicated", it said.

The committee backed suggestions from the DTI that there was a strong case for an independent watchdog similar to the one planned in the US.

It also urged the DTI to refer the big four accountants - PricewaterhouseCoopers, Deloitte & Touche, KPMG and Ernst & Young - to the Competition Commission.

Waiting for action

The committee's recommendations carry little weight without the support of the DTI.

Patricia Hewitt
Ms Hewitt says Enron-type scandals could happen here
In a number of interviews since Enron, Trade Secretary Patricia Hewitt has made it plain that she does not consider the UK immune to accounting irregularities.

"It would be crazy to say it can't happen here," she told the BBC earlier in July, adding that such scandals had demonstrated a "much too cosy relationship between finance officers or chief executives and their auditors".

But enforced rotation of company auditors is also being fiercely resisted by the accounting industry, and may not ultimately be adopted, reports say.

Nor are there any indications that the government will push the Competition Commission to investigate the industry.

See also:

07 Jul 02 | Business
04 Jul 02 | Business
04 Jul 02 | Business
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