Friday, February 22, 2013

The Commission Competition Inquiry: Big 4 too close for comfort

An inquiry launched in the United Kingdom has revealed a possible monopoly in the accounting profession. A report released by the Competition Commission estimates that PwC, Deloitte Touche, KPMG and Ernst & Young audit about 90 percent of the UK's corporations. While collusion has not been uncovered, there is reason for concern.

Investigations into past accounting frauds have found a close working relationship between auditors and corporate senior managers. The fine line between offering services and providing advice seemed to have been violated during that time. Many senior managers employed by these corporations work closely with auditors, which makes it easier for fraud to occur.

Since the past century's accounting frauds came to light, regulations have been passed to monitor and combat collusion between auditors and corporate managers. Included in these laws are measures to separate auditing and non-auditing services these firms provide. The goal is to create greater transparency and to prevent auditors from hiding questionable accounting practices.

There are no future plans to break up the Big Four, but measures will be introduced to limit their control of the market.

This finding is sure to raise alarm in the United States as well, where the large accounting firms were found to have overlooked questionable accounting maneuverings in the past. At least it should, to protect the public from another potential crisis.

Visit The Guardian to learn more.

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