Audit Firms-(07.07.02)

The UK Financial Services Authority (FSA) appears to be considering a competition investigation into the big four accounting firms. This has been based on their experience of difficulties in finding independent auditors to assist with their investigations. Given the current and emerging scandals into the auditing of published company accounts this should not be seen as much of a surprise. It is likely that changes to rules will eventually force companies to separate audit activities from consultancy service providers. With only four big audit firms this sort of regulation will ironically reduce competition between them, even more so if compulsory periodic rotation is also introduced. This is however a very difficult competition investigation to undertake. The problems of Andersen would appear to be ideal for a takeover to resolve them, reducing potential competition in the industry still further.