Big four auditors face breakup

LONDON - Reuters

The world’s top four audit firms will have to split up and rename themselves under a far-reaching draft European Union law to crack down on conflicts of interest.

“Investor confidence in audit has been shaken by the crisis and I believe changes in this sector are necessary,” Internal Market Commissioner Michel Barnier said on Wednesday. Large auditors said the plans won’t improve audit quality, while smaller rivals accused Barnier of a climbdown.

Policymakers have questioned why auditors gave a clean bill of health to many banks which shortly afterwards needed rescuing by taxpayers as the global crisis began unfolding.

Barnier said recent apparent audit failures at AngloIrish and Lehman Brothers banks, BAE Systems and Olympus “would strongly suggest that audit is not working as it should.”

More robust supervision is needed and “more diversity in what is an overly concentrated market, especially at the top end”, he said.

Four audit firms - Ernst & Young, Deloitte , KPMG, and PwC - check the books of 85 percent of blue-chip companies in most EU states.