The growth in support for a sweeping reform of the US accounting profession is, according to senior figures within the industry, wearing down the resistance of the large accountancy firms.
Reform ideas, such as mandatory replacement of public companies’ auditors every few years and the banning of audit firms conducting non-audit business such as tax-consultancy were, earlier in the year, almost universally opposed.
However, increased backing and pressure from politicians and regulators for reform, and the collapse of investor confidence has led to such opposition diminishing, with companies either falling into line or accepting that such changes are inevitable.
In particular, the concept of auditor rotation had been slammed by politicians, the Securities and Exchange Commission (the US’s financial regulator), and the accountancy profession.
However, the alleged $4 billion fraud at WorldCom, the telecommunications provider, came to light after WorldCom’s existing auditors Andersen had been replaced by KPMG. Now, even some within the accountancy profession are willing to concede that auditor rotation may not be the odious distraction that they had previously portrayed it as.
Louis Grumet, executive director of the New York State Society of Certified Public Accountants, has stated that he does not see how public auditors could portray that it would be harder for them to change when compared to, for example, elected public office holders. Mr Grumet is however opposed to rotation for non-public firms.
With regards to other initiatives currently under consideration, acceptance seems to be more the order of the day. Accountancy experts at Lehman Brothers, the US investment bank, feel an inevitability about what they see as draconian measures.
Already, in the UK, the so-called Big Four accountants have seen increasingly harsh moves against them. Most recently, the government threatened them with referral to the UK’s competition authorities. The European Commission however has cleared a takeover of Andersen’s UK arm by Deloitte and Touche, as they did not see it as a threat to competition.