Big audit firms face Brussels onslaught

Article reports that the business model of the Big Four accounting firms is under attack from the European Commission, which will propose in November 2011 legislative proposals that would force the firms to abandon their consultancy businesses and share audit work with smaller rivals.

A draft regulation, seen by the Financial Times, aims to transform the accounting sector in the wake of the financial crisis and restore 'trust' in financial reporting. It has the backing of Michel Barnier, Internal Market Commissioner, whose officials have decided the audit world is in the grip of an oligopoly.

Under the plans, companies with balance sheets greater than €1bn would be forced to hire two auditors to conduct a 'joint audit' of their books, including at least one firm outside the Big Four of Deloitte, PwC, Ernst & Young, and KPMG.

A legislative proposal from the European Commission would then have to process through the EU policy making process and face the formidable challenge of winning support from the European Union Member States in the Council of the European Union and the European Parliament.

ESO: Background information: Brussels urged to end Big Four dominance http://www.europeansources.info/record/brussels-urged-to-end-big-four-dominance/

European Commission: DG Internal Market and Services: Business environment: Auditing http://ec.europa.eu/internal_market/auditing/index_en.htm

ESO: Background information: The European Commission consults on how the European audit market can be improved http://www.europeansources.info/record/press-release-the-european-commission-consults-on-how-the-european-audit-market-can-be-improved/

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